Question

This is a take-home exam. This format should allow you more time to think about your answer. You can use the readings, lecture notes and movies (Keynes movie) to support your answer. Be sure to cite the author and page number for all quotes or ideas taken from one of the authors (e.g. King, p. 81). The length of your answers should range from 2-4 paragraphs, depending on the complexity of the question. Each question is worth 10 points.

Answer 1

The say's law of markets is introduced by the French economist J.B say, says law can be briefly explained as ' Supply creates it's own demand. J.B say argues that there cannot be over production or general unemployment in the eeconomy, what ever is produced in the economy will be automatically demanded. Say believed in the classical economics and propgated the ideas of Adam Smith across the Europe. The classicals beleived that there is always full employment in the economy. In the 1930's there was great depression across europe and it lead to the emergence of keynesian economics. Jhon Maynard Keynes was the founding father of the keynesianism and his book was 'The general theory of Unemployment'. The kenes severly criticised the say's law of markets and he said the economy always cannot be in a stable position and the economic disrortions booms and recessions are the characterstics of every capitalistic economy.Keynes argued that in such economies there cannot be full employment equilibrium in the economy and he said there will be a under employment equilibrium in the economy. The neo-classical economics emerged in the 1900s and they believed that people make maximum satisfaction by considering the utilities available for them, that is the people think rationally they dont make any decosions that makes them worse off. The neo-classical economics believed in the rational expectations, they believed that the fully flexible wages and the prices can exhibit the unemployment in the economy. There is unemployment in the economy because of the re-allocation of the jobs by people. For the post keynesian economics the empolyment and unemployment are deteremined by the product market in the economy and not by the labour market. And they also proposes that there is involvement unempolyment in the economy due to the defecient demand. While the neo- classicals says there is only voluntry unemployment in the economy that is a person is not willing to work at the prevailing wage rate in the economy. The post keynesians said that the unemployment in the economy is not due to the labour market imperfections.