Download file to see previous pages...
ion, 1930s and General Theory of Employment, Interest & Money, published in 1936 is acknowledged as the best one of his life time efforts (Skousen, 2001). This essay makes an attempt to compare the classical economic theories and Keynesian economic theories. The essay takes a descriptive approach where economic theories of two different periods are compared and contrasted from three angles, namely beliefs, theories and policies.
Firstly on the basis of beliefs-Malthus, one of the classical economists believed that, if increase in population was not enough to depress the rate of long term growth it would affect the diminishing returns. And also believed that to ensure growth the government should adopt laissez faire approach which included free trade and free markets. In addition to this, Adam Smith, the Father of Economics who introduced the notion of invisible hand supported the economic activity and led to optimum equilibrium (Stoft, 2002). They also viewed if there is disequilibrium between leakages and injections then the price would adjust to restore equilibrium. In spite of these beliefs they were not much happy in the initial periods but later they had confident with them that their approaches will lead to success in the market. But all this beliefs were strongly opposed by John Maynard Keynes in his Keynesian theory. He argued that the market will not reach to equilibrium at full employment but would reach at any level of unemployment. And also argued that need for government was not essential to interfere in the market to manage level of demand and it was the level of output restored the equilibrium and made the leakages and injections equal through his multiplier effect.
Secondly on the basis of theories-the classical economist views that free trades and free markets should be adopted to encourage growth in the market. And the government should handle the situation if there is any imperfection that prevented free workings in the market by using supply
...Download file to see next pagesRead More
Music has been used ever since age old times to assist in the expression of emotions that a person may bear. Another role that music has played is in the relaying of information that affects the society in a particular manner. There is also the vast use of music for entertainment and pure relaxation.
Adam Smith is regarded as the father of modern economics, following his treatise, ‘the wealth of nations’ (Derek, & Steven, 2003). He developed his theory at a time when capitalism was beginning to take shape as the society was gradually moving from feudalism with rapid industrialization in Europe at the time.
natural rate is fluctuating, and productivity shocks are the primary cause of economic fluctuations. The shocks are not always desirable, but once they occur, fluctuations in output, employment, and other variables are the optimal responses to them.
This theory proceeds on the assumption that large and random fluctuations in the rate of change in production technology lead to fluctuations in relative prices and individuals respond by altering labour supply and consumption.
Aggregate supply curve is horizontal indicating that firms will supply whatever amount of goods is demanded at the existing price level. Aggregate demand curve would show the level of output at the given price level at which goods and money market are in equilibrium.
Although it is true that economic growth alone can not bring sufficient changes in the average level living standard of people living in a particular country, it is an important component for obtaining higher quality of life. So, one of the major aims of any country across the world is to attain higher level of economic growth.
This rejection has been the result of the critiques directed towards it, mainly by Thomas Malthus, Karl Marx, and most significantly, John Maynard Keynes. Thomas Malthus was the first to challenge Say's Law in 1820. After him Karl Marx criticized it virulently.
The time span of these shocks is normally short and the economies revive back to their position. The continuation of this expansion and contraction trend in the economy is known as business cycle. The subject matter of macroeconomic theory mainly constitutes the business cycle theory.
Thus the basis of gaining a good insight into these economic theories comes from the way the people conduct themselves in line with the ethical codes, moral procedures, legal obligations and so on, that are generally governed by any society. A case in point is