Wednesday, March 13, 2019

Keynesian and Classical economics

submissionThe general conjecture by Maynard Keynes states that the train of employment is determined by the marginal efficiency of capital, marginal propensity to consume and the real hobby rates, he also the level of output and employment is determined by aggregate learn and that the aggregate demand posterior be change magnitude through an ontogenesis in governance expenditure.Keynes therefore assistd for government incumbrance in steering the scrimping while the classical economist argued that the government should not interfere with the running of the economy, on unemployment according to Keynes guess this problem could be resolved by the use of government policies, the two theorists disaccord in the causes and the solutions of unemployment, to the classical economists unemployment is caused by excess show which is caused by high gear wage rates, high wage rates means embarrassed demand and therefore this causes unemployment, therefore the Classical economist be lieve that the economy should be left to adjust itself until an equilibrium is reached at full employment.Says law was veritable by Jean Say who was a French businessman, according to this theory there cannot be demand without show, according to this law a street corner which is characterized by high unemployment is not caused by low demand or lack of funds, however an increase in money tack on pass on result to inflation. The Says law therefore clearly identifies the difference of opinion between the Keynes theory and classical economists in their explanation of the economy.Classical Economists and Says lawClassical economist supports Says law that supply causes demand and that there is never over supply, the Law states that people pass on supply things to the economy so that they can get money to grease ones palms other goods in the economy that are of the same value they puddle supplied. This is in line with the classical economists who argue that money does exist in an economy and that money go out settle in the economy and this flow of money flows from the businesses to the people through paying jobs.The classical economist states that the toll level is changed by the level of money supply, also that the amount of supply will always be at full employment such(prenominal) that producers will not change the level of supply but will adjust the price levels to achieve the required demand level, therefore because supply creates its own demand wherefore in the long run the economy will be at equilibrium and this means very low or no unemployment.According to the Says law the classical economist therefore be the model of the economy as follows P X Q = M X V, where P is the price level, Q is the quantity of goods sold, M is the money supply and V is the velocity of money flow. As the level of money supply increases expect that the level of money supply is constant then the price or the quantity of goods sold will increase. If on the other hand the money supply increases and assuming that the velocity level remains constant then the price level or the quantity demanded will rise, therefore our sequel for the model means that an increase in money supply is inflationally and that an increase in the velocity of money flow will lead to sparing development.Keynes Theory and Says lawKeynesians dismisses Says law as a false statement, he argues that supply and demand should be separately analyzed, on supply Keynesians says that supply generates income, people will then consume this income, the largest fate of income goes to consumption while the rest is saved, they analyzed the consumption levels of the income in foothold of marginal propensity to consume which will rise as the level of income rises.The Keynesian economist therefore considered the model of the economy as Y = C + I + (X-M) where Y is income, C is consumption, I is the investment X is exports and M is imports. The model is further analyzed as C = (a + b Y) where a is the autonomous income level, b is the marginal propensity to consume and Y is the income level.ConclusionWe can conclude that the Says law is the major difference between the Keynes theory and the classical economists, the classical economist support the Says law and also advocate for a free market economy while Keynes argues that the government can solve the problem of unemployment in an economy through an increase in spending to increase the aggregate demand that results to lower unemployment levels.ReferencesAlan Coddington (2003) Keynesian political economy The First Principles, Rout ledge publishers, USAlfred William (1991) The Classical Economists and Economic Policy, University of dinero press, MichiganGeorge Douglas (1967) Macro-economic Theory A Mathematical Treatment, Macmillan publishers, USSteven Kates (2003) devil Hundred Years of Says Law Essays on Economic Theorys Most disputable Principle, Edward Elgar Publishing, USJohn Fender (1981) Understanding Keynes An An alysis of the General Theory, Wiley publishers, US

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