Question

Which do you think is a more accurate view of the economy, the Keynesian or Classical View?. Explain.

Answer 1

The main diffrence between the Keynesian and the classical view is the effect of govt. policies over the economy. While the keynesian belives in the govt. intervention in the economy the classical theory belives on free market and no intervention by the govt. in terms of govt. spending which in turn wolud reduce the burden over the people in terms of taxes and people could spend more on the things that they want to.

Keynesian accepts that capitalism is a good system, but that it sometimes needs help. When times are good, people work, earn money and spend it on things they want. The spending stimulates the economy, and everything runs smoothly. But when the economy goes downhill, moods change.During tougher times, businesses start closing and firing their employees. People don't have money to spend, and they try to save what little they have left. When people quit spending, the economy loses its momentum and spirals farther down.

we can take the example of the on going Pandemic in which there was a worldwide shutdown and various economies are on the verge of collapsing. In this case we can see how important govt. intervention becomes otherwise the condition could have been more worse if there was no intervention by the govt. .Almost all the goverments in the world have anounced relief packages for the people of their country so as to protect the intrest of their country men. Hence we can say that in a way Keynesian view is better than the classical model of economics.