Notice: Payments for answers will end 4/10/2017. Click for more info.
You have new items in your feed. Click to view.
Question and answer
Q: Explain the viewpoints of classical and Keynesian economists. How did the economy that existed at the time of these theories influence them? Which theory is more appropriate for the economy today?
Why?
A: Classical Economics Assumptions Before working our way towards the workings of the Classical economics model, let us first know and understand the classical economics assumptions. [ The idea, is that like any theory, if the founding assumptions do not hold, the theory based on them is bound to fail. There are three basic assumptions of Classical Economics theories. They are: Flexible
Prices: The prices of everything, the commodities, labor (wages), land (rent), etc. must be both upwardly and downwardly mobile. Unfortunately, in reality, it has been observed that these prices are not as readily flexible downwards as they are upwards, due a variety of market imperfections, like laws, unions, etc. Say's Law: 'Supply creates its own demand'. The Say's law suggests that the aggregate production in an economy must generate an income enough to purchase all the economy's output. In other words, if a good is produced, it has to be bought. Unfortunately, this assumption also does not hold good today, as most economies today are demand driven (production is based on demand. Demand is not based on production or supply). Savings - Investment Equality: This assumption requires the household savings to equal the capital investment expenditures. Now it takes no genius to know, that this is rarely the case. Yet, should the savings not equal the investment, the 'flexible' interest rates should be able to restore the equilibrium. Keynesian Economics Assumptions Like all economic theories, the Keynesian Economics school of thought is based on a few key assumptions. Let us have a look at them first, before we progress on to the application of Keynesian economics in the actual economy. Rigid or Inflexible Prices: Mostly we see that while a wage hike is easier to take, wage falls hit some resistance. Likewise, while for a producer, commodity prices are easily upwardly mobile, he is extremely reluctant for any reductions. ]
cjam_1977|Points 290|
Question
Asked 12/27/2012 11:03:43 PM
0 Answers/Comments
Get an answer
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
25,791,057 questions answered
Popular Conversations
Aristotle was a student of Plato's. True False
Weegy: Aristotle was a student of Plato's. TRUE.
7/9/2017 6:34:10 PM| 1 Answers
Most collisions are caused by __________ A. drivers falling asleep at ...
Weegy: Most collisions are caused by driver's attitude.
7/9/2017 4:51:29 PM| 1 Answers
k2 + 3k + 2 = (k2 + k) + 2 ( __________ )
7/8/2017 8:58:45 AM| 1 Answers
Parasite can be Protozoa,fungi, or multicellular organisms. TRUE or ...
Weegy: Parasites can be protozoa, fungi, or multicellular organisms. TRUE.
7/7/2017 6:41:18 PM| 1 Answers
Development disabilities cannot be cured. TRUE or FALSE.
Weegy: Developmental disabilities cannot be cured. TRUE.
7/7/2017 6:00:57 PM| 1 Answers
. Classification of living things takes into consideration all of ...
Weegy: Classification of living things takes into consideration all of the following except: presence of cell ...
7/5/2017 12:07:33 PM| 1 Answers
What type of disorder is myasthenia gravis? A. Inflammatory ...
Weegy: Myasthenia gravis is a type of immune disorder. User: What surgical procedure involves breaking an ankylosed ...
7/5/2017 9:35:49 AM| 1 Answers
The lungs are the primary organ of the: digestive system respiratory ...
Weegy: The lungs are the primary organ of the: respiratory system. User: Endorphins are manufactured by the brain to ...
7/5/2017 6:54:42 AM| 1 Answers
During puberty you need more food and _____ to grow. oxygen carbon ...
Weegy: During puberty you need more food and oxygen to grow. User: Each cell in your body contains chromosomes.
7/5/2017 6:43:00 AM| 1 Answers
The condition of equilibrium that results in the displacement of the ...
Weegy: The condition of equilibrium that results in the displacement of the mantle by the continental and oceanic crust ...
7/10/2017 1:50:08 PM| 0 Answers
What is another name for the Circum-Pacific Belt? A. Pacific Ring ...
Weegy: Pacific Ring of Fire is another name for Circum-Pacific Belt
7/10/2017 1:47:35 PM| 0 Answers
Weegy Stuff
S
Points 29 [Total 30] Ratings 0 Comments 9 Invitations 2 Offline
S
Points 10 [Total 10] Ratings 0 Comments 0 Invitations 1 Offline
S
Points 10 [Total 10] Ratings 1 Comments 0 Invitations 0 Offline
S
Points 10 [Total 10] Ratings 0 Comments 0 Invitations 1 Offline
S
Points 4 [Total 4] Ratings 0 Comments 4 Invitations 0 Offline
S
P
P
L
P
P
P
Points 4 [Total 1734] Ratings 0 Comments 4 Invitations 0 Offline
S
Points 3 [Total 3] Ratings 0 Comments 3 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
* Excludes moderators and previous
winners (Include)
Home | Contact | Blog | About | Terms | Privacy | © Purple Inc.