According to the classicals, deviations from full employment are due to adjustments from shifts in the...

According to the classicals, deviations from full employment are due to adjustments from shifts in the labor supply and demand curves. Why do Keynesians argue this point?

Expert Solution

Ans : Classical economics always believes in existence of full employement.He believes in full employement is very normal in the economy where as Keynes argues that full employment is the not the presence of involuntary unemployement .According to keynes; In the economy who wants to work get work.keynes believes that full emplyement can only be approachable when there is decline in the rate of wages.If full employement want to achieve therefore its necessary to attain a decline in real wages that can bring by increasie in effective demand .

As effective demand increases ,supply or production needs to be increases ,to increase in supply or fulfillment of demand employement increases.keynes says full employment situation can check if increase in effective demand is not accompained without increasing output.

Rahul Sunny answered 2 years ago

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