Classical Economics vs Keynesian Economics

Classical economics and Keynesian economics are two different economic theories. Classical economics is based on the idea that the markets are self-regulating and will eventually lead to full employment and economic growth. Keynesian economics, on the other hand, is based on the idea that government intervention can be used to promote economic growth and stability.

The Classical Theory of Economics

The classical theory of economics is based on the idea that the markets are self-regulating and will eventually lead to full employment and economic growth. This theory is based on the concept of Say’s Law, which states that supply creates its own demand. This implies that, given the right conditions, the markets will be able to produce enough goods and services to meet the demands of the population. According to the classical theory, if the government intervenes in the markets, it can actually lead to inefficiencies and economic downturns.

The Keynesian Theory of Economics

Keynesian economics is based on the idea that government intervention can be used to promote economic growth and stability. This theory is based on the concept of aggregate demand, which is the total demand for goods and services in the economy. According to Keynesian economics, if the government intervenes in the markets, it can help to increase aggregate demand, thereby promoting economic growth and stability.

Differences Between Classical and Keynesian Economics

The main difference between classical and Keynesian economics is their views on government intervention. Classical economics believes that the markets are self-regulating and should be left alone, while Keynesian economics believes that government intervention can be used to promote economic growth and stability.

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