John Maynard Keynes And The Classical Model Essay

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Part One John Maynard Keynes is referred to as one of the most well known economists of his time. Not only was he able to come up with a solution to essentially try to move the economy out of recession and stop booms and busts, but his theory is still being used in todays day and age 70 years later. One big question that has been asked repeatedly about Keynes theory is why did he not believe in self-adjustment of the economy. Keynes rejected the idea that market economies would automatically move towards full employment. He claimed to have found many flaws in the classical model as a whole (Davidson). Overall Keynes rejected the classical models claim that markets self-adjust to solve economic problem because his insight was the opposite of the classical model. He was convinced that sometimes things don’t sort themselves out. The economy would actually continue to go into a downward spiral and the usual dynamic of supply and demand would essentially break down. As far as policy prescriptions for a recession, Keynes stated that, “If all else fails, the government can spend the money” (Davidson). Not only did he think this, he also was convinced that they shouldn’t raise taxes or try to balance the budget. If either of these things were to be done, it would essentially cancel out any positive effect from spending. Keynes seemed to have felt very strongly that his theory was bound to work, as well as the people who followed him and his theories closely. However, economists
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