The factor which distinguishes between classical and keynesian macroeconomics
Answers
Answer:
The differences between Keynesian theory and classical economy theory affect government policies, among other things. One side believes government should play an active role in controlling the economy, while the other school thinks the economy is better left alone to regulate itself.
Answer:
Classical economic theory is rooted in the concept of a laissez-faire economic market. A laissez-faire--also known as free--market requires little to no government intervention. It also allows individuals to act according to their own self interest regarding economic decisions. This ensures economic resources are allocated according to the desires of individuals and businesses in the marketplace.
Keynesian economic theory relies on spending and aggregate demand to define the economic marketplace. Keynesian economists believe the aggregate demand is ofteninfluenced by public and private decisions. Public decisions represent government agencies and municipalities. Private decisions include individuals and businesses in the economic marketplace. Keynesian economic theory relies heavily on the fact that a nation’s monetary and fiscal policy can affect its economy significantly.
Inference: Keynesians place a greater role for expansionary fiscal policy to overcome recession. The Classical model stresses the importance of overcoming labour market imperfections to ensure the economy returns to equilibrium
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