Macroeconomic Theories Of Macroeconomics And Classical Economics

Keynesian economics, derived from the ideology of John Maynard Keynes’, was a strategy used during post World War II that would prevent economic decline in the United States by incorporating government spending. Keynesian economics would work by using “...deficit spending to stimulate the economy when in the down cycle and increased taxes to retire the debt during the upswing.”(Lecture A, Week 5). Some government spending programs that reflected the idea of Keynesian economics in America included The Employment

The effects of inflation, government regulation and taxes can all play an important part in developing classical economic theories. Classical economists also take into account the effects of other current policies and how new economic theory will improve or distort the free market environment ("Differences Between Classical & Keynesian Economics", 2013).

The third question, Can Monetary and/or fiscal policy reduce unemployment in the long run? The classical macroeconomists thought the government could not change unemployment. They believed fiscal policy would only cause a short increase in the real output. Classical economists say that in order to decrease unemployment, it is imperative to use supply side policies in order to raise the adaptability of labour markets. The Keynesians thought the complete opposite, they believed that expansionary policies could be effective in maintaining a long term low unemployment rate. Fiscal policy would boost aggregate demand curve, and as a result, would create higher output, thus in the end, producing

Macroeconomics (from the Greek prefix makro- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies.[1][2] With microeconomics, macroeconomics is one of the two most general fields ineconomics.

Keynes believes that the government has a positive effect on the economic growth and the quality of services. In recessions, businesses and people tend to spend less money. He was against this idea and suggested that “it’s spending that matters” because lower spending results in demand falling and job losses. Keynes's solution to the problem was for the government to play an active role in the economy. If the government plays an active role in the economy, the economy will bloom and progres to its full potential. He believes that the government should stimulate economic growth by increasing demand through increased credit and public spending. Keynes is embracing liberal views such as economic freedom for the people to an extent in which it boosts the economy as he believes it’s the key factor that allows the economy to reach its full potential with government intervention. Keynes disagreed and strongly opposed Milton Friedman’s ideas. Friedman suggested the monetary policy, controlling the money supply, can help out the economy throughout recession. On the other side, Keynes suggested that monetary policies play a very little role in stimulating the economy and aggregate demand. He disagreed with Milton Friedman’s ideas as he believed the government should encourage spending and discourage

The three primary concerns in macroeconomic analysis that I found played a major role in macroeconomics was gross domestic product, inflation and unemployment. All three of these concerns tie together and affect one another. But first let’s start off with inflation. Inflation is referred to as a broad increase in the price among services and goods within an economy over a certain period of time. Inflation has always been a concern for businessmen, policymakers, and investors. When inflation is expected, it can be planed for. Example being businesses will raise prices, so workers will demand higher wages, and then lenders will raise interest rates. You then have unexpected inflation, which is where inflation is higher than expected and tends

Neoclassical Economics is an attempt to restore some of the principles that Adam Smith, a pioneer for capitalist markets, advocated for in his Classical Economic theory. Smith suggested that minimal intervention should be required regarding government policy as the laws of supply and demand will be self-correcting. John Maynard Keynes was an important figure that worked to apply fiscal policy that would remedy an economic depression. Keynes’s idea of fiscal policy is the means by which government adjusts its spending levels and tax rates to monitor and influence the economy. Further, Keynes is known as the father of “Mixed Economy”, in which both the private sector (households and privately owned businesses) and public sector (government) have an active and important role in the economy. He argued that in a capitalist economy, the government would have a direct response to where in a business cycle the economy was at any particular time—Borrow to spend in a Recession or Bust, and spend only to the level of revenue collected during a period of growth or Booms. Milton Friedman, an American economist, believed strongly in a neoclassical, one-directional approach to monetary policy, where the Federal Reserve should limit monetary policy to increasing M1 (primary money supply) at a consistent rate, slightly higher than the birth rate, in order to keep economic growth at effective levels. Moreover, he believed the federal government should tax minimally in order to

John Maynard Keynes was a well-known British economist, and is credited with the establishment of modern macroeconomics. One must remember that the concept of macroeconomics already existed, but Keynes’ addition includes a “systematic approach to aggregate economic phenomena.” (CITE SNOWDON/VANE P 13) While The General Theory of Employment, Interest, and Money might be his most famous work, he also had two other important works released before it. The first was The Economic Consequences of the Peace in 1919, arguing that the Versailles Treaty would lead to another war in Europe. The second, released just six years before General Theory, was A

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. They develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance.

Economics is made up of two smaller categories microeconomics, and macroeconomics. Microeconomics is more of a smaller scale such as an industry while macroeconomics is on a more national level. It is important to study economics even if you are not a business owner. For example, understanding economics and the market, you could better determine when to buy a house or when to start up a business. In a YouTube video titled “AP Econ Music Video Microeconomics SPHA”, a group of teenagers worked on a music video summarizing major concepts of economics. In that video, there are a lot of key factors such as supply, demand, monopolies, elasticity, and costs that are beneficial to both producers and consumers.

In economic theory, Keynes proposed that an increase in public spending could keep economic activity at an acceptable level. The resultant increase in Equilibrium GDP of government expenditure has a resultant stimulus in economy and aggregate expenditure. (Jackson & McIver, 2001)

The history of macroeconomic thought and policy was developed through different phases mainly marked by the depressions, recessions and expansion of the 1930s, 1960s, 1970s, 1980s, 1990s, and 2000s. Various macroeconomic theories were developed during these periods. Among them, Keynesian and classical economics addressed economic problems such as unemployment issue with similarities but also differences.

Vjyaser. (2013, March 18).Classical and Keynesian Economics: Contending Approaches to Macroeconomics. Slideshare. Retrieved from: http://www.slideshare.net/vjyaser/classical-and-keynesian-economics-contending-approaches-to-macroeconomics

Thus finally we come to know that the classical model does a good job after explaining the economy in a very long run period in where typically full employment will be there for all the people. Whereas the Keynesian model also does a good job by explaining typically what happens in the short run period of time, when there is depression and at the same time people are completely left out from the

The classical view of employment and income began in 1776 and lasted all the way up until the early 1930’s. The main belief of the classical economists was that the economy would automatically adjust itself toward full employment. They got their predictions using “Say’s Law”, which means “Supply creates its own demand”. In other words that businesses would create enough income to produce the right amount of output. Say’s law explained that the economy would reach full employment if all the people seeking jobs were willing to work for the wage that is equal to their