Question

Compare and contrast Keynesian and classical views on savings and government spending in the macroeconomy.

Answer 1

Keynesian play an important role for government intervention to overcome recession.

while the classical model limits the government intervention and puts barriers to their efficient operation.

Classical model is thus often termed as 'Laissez-Faire' as there is very little government intervention in the economy.

In keynesian model there is a greater need in government soending especially in private sectors.

The classial views shows the importance of consumer spending and business investments for nations economic growth.

To the classical economists too much government spending leads to the loss of valuable economic resources.

It also shows that increasing government spending will hold back the nations economic growth.

While the keynesian view relies on government spending for economic growth during the time of downfalls.

Unlike classical views it shows that the government spending can improve the economic growth in the absence of consumer and business spendings.

Hope this was helpful!