Question

Topic Compare and contrast the competing schools of thought: Classical versus Keynesian. Explain whether you are a Classical, Keynesian, or neither type of economicst.

Answer 1

The comparison and contrasting points between classical and keynesian school of thoughts are as follows:

Factors	S. No #	Classical school of thoughts	Keynesian school of thoughts
Market Perfectness	1	Laissez faire approach - market is perfect	Market is not perfect and not self-sustaining
Wage rigidity	2	Wages are flexible in absence of trade union / minimum wage laws	Wages are sticky downward
	3	Economy is always at full employment level	Economy is at less than full employment level in short-run
Popularization	4	Popularized during industrialization	Popularized during Great depression
Production	5	There is never over production	There is a possibility of glut - Supply may not match the demand
Fiscal Policy	6	Government spending is not major market force - Fiscal policy causes no long-term increase in real output	Expansionary fiscal policy - Government spending can influence demand in recession
Aggregate Supply	7	Aggregate supply curve is vertical at full employment level of output	Aggregate supply curve is upward sloping
Market demand force	8	Focus on Say's law - Supply creates its own demand	Consumer income stimulates demand
Economic problem solution	9	Focus on creating long-term solution to economic problem	In the long-run , all are dead
Government intervention	10	Government intervention can be detrimental	Government spending for jumpstart growth
Savings & Investments	11	Equality between Savings and Investments is brought by rate of interest chnage	Equality between Savings and Investments is brought by income change
Quantity theory of money	12	Explains value of money in terms of changes in its quantity	During recession, with increased spendings in terms of money, increase in output & employment is brought about without affceting price level
Money demand	13	Money is demanded for transaction purpose	Money is demanded for transaction and speculative purposes
Theory	14	Theory relates to special case of full employment	Theory relates to all situation - unemployment, partial employment and near full employment

I am a Keynesian. I believe that government have greater role in bringing economic growth with stability.