One of the fundamental differences between Keynesian and Classical economics is

Question

One of the fundamental differences between Keynesian and Classical economics is their view of equilibrium in the macroeconomy. Which statement is correct?

A. Classical economists believe in a single-level of equilibrium activity, while Keynesian economists believe equilibrium can occur at a variety of output levels.

B. Classical economists believe equilibrium can occur with unemployment, while Keynesian economists believe equilibrium occurs at full employment

C. Classical economists believe we can use fiscal policy to stimulate the economy toward full employment, while Keynesian economists believe such a program is unnecessary and will only produce inflation

D. Keynesian economists believe in a long-run equilibrium with no inflation, while classical economists believe that inflation is necesary to achieve an equilibrium level of output in the long run

Explanation / Answer

C. Classical economists believe we can use fiscal policy to stimulate the economy toward full employment, while Keynesian economists believe such a program is unnecessary and will only produce inflation

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