Question

Explain the viewpoints of classical and Keynesian economists. How did the economy that existed at the time of these theories influence them? Which theory is more appropriate for the economy today?

Answer 1

-viewpoints of Classical economists Viewpoints of Keynesian economis (1) This believes in lainzy tam is This envisages, the role of a economy ie no government inter- state interference in the -ention as required. functioning of economy (2) Working of envisible hand would (2.) Marked is prone to . automatically bring full employne failun & may not work efficiently -- -nt in the economie on its own. Then is always less than full employment I situation in the liovone. 13. W ag prices and rate of interest (3.) Wages bekes & riterest au fully flexible and adjusts rates au sticky (specially in a quickly to re equilibrate the downwand direction) and takes I time to change les llone path O CamScalher

Page No. (4.) Warkey faces money illusion (4) Economy I wakes faces money no money illusion (5) Money is neutral in its effects in do not affect real variables Theu es classical dichotomy in the markets | (5) Money is non neutral & affect real as well as monetary variables Markets are interlinked to each other. UD UU . (6.) It believes in says law (6) It criticizes says law - of market in supply creates and believe that economy - its own demand." I always under perform in the econdly in then is always I deficiency of demand > Influence on classicals I i mille Influence on Keepsessous 2. Classical economics was bobular at • This was a reaction to classical - the time of late 19th & eally to euromig and rose in the s nid 19th century when then was backgwind of "Great Depression - an idea of anti mercantilist of 1930 • . a sentiments. 1. The chief proponent was J.M. • The discovery of new lands og Keynes who wrote his General - America, Australia ste opened theory on employment interest & were door for new two womic opportunities in 1829 1 proposed the idea of d everybody felt the need for government support to avive I hau teade to without gout aggregate demand in the econo e interference (which only centralise this was turned as a Imoudbalises trade) o Meynesian Revolution" & beea I. Man scholay Adam Smith popular to establish new - David Ricardo proposed this at economie would ader. the forefront ! S SamScanner

Neither of the theories are level rather some tenents In todays economics whille appropriate at an absolute of their al highly useful some are not empirical t & The emerginu of New classicals & Neo Keynesiens t enviseiged an improved explanations to the I somewhat cude ideas of their proponents i n They have poulded mou realistic explanations of thein ideas considering the changed & ever changing situations in the World econonus. i huden d = Though, then exists a lot of economic subschools of keynes & clessicals but in this present scenario, 7 the ideas of Keynes are much more relevant = When seen from the perspective of ongoing market a failues, financial cuses slowing down of a would economy and growing notion of welfare - state ... In that context, Keynes ideas are highly s relevant while also considering the ideas of a expectations (national) given by New classicals - So, we can conclude that Keynes revolution is still a nou approbwate than classical ideas our NOTE 8 views are reality. You can CS Scanned non besonal but are based ou ! trust on them .