Question

Which model is known to do a good job explaining recessions and the rise and fall of cyclical employment?

neoclassical

supply-side

Keynesian #3

Answer 1

The following are brief explanations to each of the theories listed and the correct answer is as follows:-

Neoclassical:-

The neoclassical approach is an approach to economics, is focused on determining the goods, outputs and income distribution in markets through demand and supply.

It studies thus, the forces of demand and supply to arrive at the distribution of income, maximum utilization of it across different goods for consumers and ensuring optimum levels of output.

Supply Side Economics:-

Supply side economics deals with the question of how, aggregate supply in an economy is determined, and what measures, an economy must take in order for it to be able to increase the overall supply in the country.

They argue that to achieve growth, taxes can be lowered and regulations can be removed to achieve higher production levels in the economy.

Keynesian Model:-

The Keynesian model was developed, during the great depression and helped numerous countries in tackling with their situation of recession and depression. It analyzed that since demand in all countries are volatile and ever changing, recessions were inevitable and need to be tackled using government policies of various kinds.

Therefore, the correct answer to the question is option (C) Keynesian Model as it explains recessions and rise and fall of cyclical employment in the best manner.