Question

1. Compare Keynes and the Classicals with respect to the normal state of capitalist economy, the causes of the business cycle, and macroeconomic policy.

Answer 1

The talism is a phenomena of the busty which is prominent in the Authe economic system for the longest time. Diffo Economist have studido wat salitalism is and how it is! working in the souety / Economie systin The Is mayor school of thoughts are 0 Merchantallist o corsical 0 Keynesian. of understand how capitalism wooked in these areas, we must understand some sosic dess governing the capitalisme Capitation is based on the monimum profit entraction in an Economic system esually via the sconership of mode of toovatioul ownership being private). investment with a motive of manniga of polite. In dahitahin money canne Theo sunen of property I makes dousious an increase treated of crease as a ve the as a Bell al money commacht poth & pical money is i proler to morease nrestment by meetmet Chauend

bein - mode of production), this can be semecented as M- MOP - MI MOP - Mode of Production M Money М'zM Hii # Classical Capitalism & In the mid af 18th Century, economist line David Hume and Adam Smith challenged the onsisting ethan) beliefs of the economie system. The already ensicting beliefs incluso in the merchantalist beologies. Acco do the merchantalict a take could only grow and Slounish only if one state grow! at the onsense of another state. It also assumed the the total money in an econanie system on the same. Hence the idea of state was to protect the nation with restricting the international trade and proferting the int working classes. .C Domesti producers),

of protectionian bas soon. Coming back to classical thought take trade end To the industries of Britain Tomket the free showed the nation could on the grow base of investment del pass at the Domestic prodhuess talking about the brusness cycle, the formula I worked Ar those worlly in the foreign mkt, with their goods of quality with standay international competition. The inculpatinate o of agriculture bead to new techniques Jeasly to investment in (Mode of Prochuhe) machine other than human. the one sunt the competitia acumuland all the capital Keynesian capitalism & Following the idea of "free rikt- tech) the soualist idea of gout. Interventiene was proposed this was a result of met Comeshe suffers due to the international met and a free trade. Also in the comy of globalization, the id saw the need of some protectionalt macro Cuonomie policy: dury the stock mut crash of 1929,

free met ideology and its principles were abandoned the new affranch noas inhochmed by John Maynard Keynes, who argued the donomy to be suffering from Producto demand of goodles and the only way to remedy I was to stabili gel they Conny and its consumption. This was atwaliced as "New Deal" in the Us. The New deal model comfined with Production boom after the world way lead to sumulatia of Caftel in us making it hise in lower which was further adopted iwracted for making more money sa technological investiment