ANSWER

Classical and Keynesian economics are contrasted and contrasted.

1. Philosophical Bases of Traditional Economics

    Based on the conviction that less government interference and free markets are best.

    Emphasizes the importance of personal self-interest and sound judgment.

    Believes that the market’s “invisible hand” regulates allocating resources.

Economics based on Keynes:

    Supporters of direct government involvement in managing economic swings.

    Emphasizes the significance of total demand and how it affects the economy’s health.

    Argues against the notion that markets usually perform short-term self-corrections.

2. The Function of Government: Traditional Economics

    Favors little or no participation of the government in the economy.

    Has the opinion that government intervention can cause market inefficiencies and distortions.

    The belief is that markets will naturally attain equilibrium and laissez-faire policy.

Economics based on Keynes:

    Supporters of government action to stave off economic downturns.

    Proposes monetary and fiscal measures to boost demand during downturns.

    Believes increased government expenditure may stabilize growth and stimulate the economy.

3. Employment and Productivity: Traditional Economics

    Believes that full employment results naturally from open markets.

    Argues that long-term full employment can be achieved by wage and price adjustments.

    Does not consider ongoing unemployment to be a severe issue.

Economics based on Keynes:

    Argues against the notion of a total employment economy.

    Highlights the chance that a lack of demand may cause involuntary unemployment.

    Asserts that governmental action can assist in preserving steady employment levels.

4. Total Supply and Demand: Conventional Economics

    Focuses on the economy’s supply side, with a strong emphasis on resource allocation and production.

    Believes that any imbalances are transient and that supply and demand are self-generating.

Economics based on Keynes:

    Emphasizes the role of total demand in generating economic activity.

    Claims that when supply is insufficiently met by demand, economic downturns result.

Reasoning and Preference: I favor the classical economics paradigm as a traditional economist. This Preference is based on the premise that self-interest drives individual choices and that, collectively, these choices produce the best results under free markets. I favor moderate government action since excessive government engagement might cause distortions and impair market systems. Despite the possibility of economic downturns, I believe in the market’s propensity to self-correct over time and the efficient distribution of resources resulting from competition.

Approach to the Current U.S. Economy: As a classical economist, I advocate for little government interference in the current U.S. economy. I would focus on initiatives supporting free markets, fostering entrepreneurship, and lowering regulatory hurdles. I would support a balanced budget and responsible monetary policy to ensure price stability. I would rely on market mechanisms to adjust salaries and prices to manage economic fluctuations, allowing the economy to return to equilibrium inevitably. Although this strategy would present short-term difficulties, it would result in enduring long-term progress and prosperity.

QUESTION

Description
During Week 2 or earlier, the instructor assigns students to one of two groups: the classical school (including its later development such as monetarism, Austrian economics, supply-side economics, new classical economics)and the Keynesian school (including its later development, new Keynesian economics). Then, the two groups (or four to include two classical groups and two Keynesian groups, depending on the number of students with about seven or eight students per group) discuss classical economics and Keynesian economics, defending their school and criticizing the other school’s theories and practices. In your responses,

Compare and contrast classical economics and Keynesian economics. What are the major differences between them?
Which model would you prefer? You may already prefer one because you are defending your school. Thoroughly explain your reasoning.
As a classical economist or a Keynesian economist, what would you do for the current U.S. economy?