Question

Explain the Keynesian theory of interest-rate determination.What differences do you see between this theory and the classical theory of the interest rate?

Answer 1

Answer:

The classical theory of interest is a special theory because it presumes full employment of resources. On the other hand, Keynes theory of interest is a general theory, as it is based on the assumption that income and employment fluctuate constantly. ... According to Keynes, savings depend on income.

Answer 2

Answer:

The classical theory of interest is a special theory because it presumes full employment of resources. On the other hand, Keynes theory of interest is a general theory, as it is based on the assumption that income and employment fluctuate constantly. ... According to Keynes, savings depend on income.