Question

What is the approach adopted by the Argentinean government in the 1880-1886 period? Keynesian or classical? Explain.

Answer 1

To understand the approach followed by the Argentinean government in the 1880-1886 period, it is important to know the key difference between the Keynesian and the Classical approach.

The key difference is the fact that the Keynesian approach focuses towards government involvement in ensuring full employment and to achieve economic and output targets. On the contrary, the classical approach considers that the market corrects by itself and full employment returns by itself.

Now if we compare that to the Argentinian policies adopted during the period of 1880-1886, we clearly see government involvement in the economy. Argentina began export of livestock and grain commodities during that time period to allow for easy growth and generation of revenue.

Argentina’s growth prior to that period was extremely limited. Once the government opened up the economy and started exports and invited investment into the economy in the time period, the GDP began a steady growth at around 8%.

The fact further that the government was actively involved in the economic transition of the country highlights, that the country was following a Keynesian approach rather than a classical approach respectively.

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