According to the lectures, which of the following ideas are representative of (neo)classical (orthodox) theory, which...

According to the lectures, which of the following ideas are representative of (neo)classical (orthodox) theory, which are representative of (post)Keynesian (heterodox) theory, and which are shared by both theories?

1.	(neo)classical
2.	(post)Keynesian
3.	Both

Output, income, and employment fall when money saved exceeds intended investment, until savings equals investment

Savings equals investment in equilibrium (ignoring government or foreign sector)

Interest rates fall when money saved exceeds the demand for those funds for investment, until savings equals investment

"In the long run, we're all dead

Demand, particularly intended investment, drives supply

Capitalist economies tend to full employment, at least in the long run

In equilibrium, aggregate demand (total planned spending) must equal output and income

Investment and savings are primarily functions of the rate of interest

The paradox of thrift

The loanable funds market
	Saving is a leakage out of, and investment is an injection into, the spending flow
	Supply creates its own demand
	Capitalist economies will normally fail to reach full employment due to insufficient aggregate demand

Expert Solution

	Classical	Post Keynesian	Both views
Demand, particularly intended investment, drives supply
In the long run, we're all dead
The paradox of thrift
Output, income, and employment fall when money saved exceeds intended investment, until savings equals investment
Supply creates its own demand
Capitalist economies will normally fail to reach full employment due to insufficient aggregate demand
Savings equals investment in equilibrium (ignoring government or foreign sector)	S =I at full employment	S = I even below the full employment level
Capitalist economies tend to full employment, at least in the long run		Only the short-run was considered. Governments should act fast in the short-run rather than wait for market forces to fix the economy over time.
Saving is a leakage out of, and investment is an injection into, the spending flow
Investment and savings are primarily functions of the rate of interest
Interest rates fall when money saved exceeds the demand for those funds for investment, until savings equals investment
In equilibrium, aggregate demand (total planned spending) must equal output and income
The loanable funds market

Rahul Sunny answered 2 years ago

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