1. Prepare a comparative table in which you compare: a. Classical Economy b. Keynesian Economy

Question

Question

1. Prepare a comparative table in which you compare:

a. Classical Economy

b. Keynesian Economy

Answer 1

Answer #1

Difference between Classical & Keynesian Economy
Classical Economy	Keynesian Economy
Free market economy	capitalist economy
Classical economist believe that free markets can operate efficiently.	Keynesian economist believe that the market requires intervention by the government in order to operate efficiently
No intervention by government is required	Government should intervene in order to make the economy efficient.
Government should not spend as it will increase the Government debt.	They feel government spending has multiplier effect on the economy which improves the Aggregate Demand
They are more concerned about inflation. They feel inflation is threat to long term growth of the economy	They are more concerned about unemployment. They don't worry about the cost of goods and Inflation.
Price is determined by market forces that is through demand and supply. That is prices fluctuates with the change in supply and demand.	Here the economist feel government should intervene in controlling the market price. The economist feel prices must be rigid that is it must not fluctuate.

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Answer 2

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