What do you thing? I aggre or disagree and why? Keynes Vs. Classical COLLAPSE Bo

Question

What do you thing? I aggre or disagree and why?

Keynes Vs. Classical

COLLAPSE

Both Classical and Keynesian economist have great economy perspective on business cycle theory which is why it is extremely difficult to pick a side. In my opinion, Classical economist would have to be a perfect choice for the wellbeing of the economy. Classical economist’s perspective is a great choice because it can set the labor market in long run equilibrium which is when unemployment rate equals natural unemployment. Although this might be true, a Keynesian economist might argue that increasing aggregate demand by either increasing consumption, business spending or government spending will increase economy by creating a “boom”, but that “boom” cannot guarantee a lasting solution. Too much spending can cause debt to those who spend too much or send extra money that they do not have due to the low interest rate credit cards provide. The most convincing advice provided by the videos is the importance of real saving and investments. Saving and investing in capital structure will benefit the economy instead of creating debt. Focusing on a the “boom” instead of the “bust” will provide lasting result in the economy instead of creating a quick fix by spending in consumption, business spending or government spending. If the economy is in a recession gap or inflation it can move itself from both states down to long run equilibrium, also called self-regulating economy and lowering wages.

                Even though my choice leans towrds the perspective of Classical economist, I understand why the perspective of a Keynesian economist can also help the economy. During difficult times or when the economy remains stuck, I also agree of a successful way to get to long run equilibrium is to have government stimulate aggregate demand. Above all, it was entertaining to watch the videos of both point of views of Classical and Keynesian economist

Explanation / Answer

True, in today 's world role of goverment has increased. Government must ensure measures to pull economy out if recession. As Keynes argued that only goverment can boost aggregate demand through expansionary fiscal policy and bring economy out of recession .

Similarly playing grounds are not equal all around the world . To give power to engine of growth intervention of goverment us much needed.

Thus also in case of market failure regulation by government can prevent the inefficiency in market.

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