Economics Classical Economics And Keynesian Economics

As interesting as the subject of economics is, it’s a subject that isn’t easily understood. In order to grasp the subject you have to really understand the concepts. And it’s not like riding a bike, once you know how to do it you will always have it engraved in your head. I will attempt to highlight the key factors of the two theories of economics: classical economics and Keynesian economics. Since Classical Economics is considered to be the first school of economics. I will start to explain this concept first. In the 18th and 19th centuries, there was a group of economists that worked together to develop theories to explain how market to market relationship work between each other. The most important contributor to the classical school of economics was the great economist Adam smith, whom is considered the founder. Adam Smith stated in an excerpt from ‘An Inquiry into The Nature and Causes of The Wealth of Nations’. â€Å"By pursing his own interest, he (man) frequently promotes that (good) of the society more effectively than when he really intends to promote it. I (Adam Smith) have never known much good done by those who affected to trade for the public good.† You will understand that from those thoughts Adam Smith created the foundation of classical economics. It is key to point out the basic structure or assumptions that form classical economics. The three theories that sticks out to me are: Say’s Law: Say’s law suggests that aggregate production in an economy generatesShow MoreRelatedClassical Economics And Keynesian Economics1124 Words   |  5 Pagesof Classical Economics and Keynesian Economics has given me the opportunity to form an opinion on this greatly debated topic in economics. After researching this topic in great lengths, I have determined the Keynesian Economics far exceeds greatness for America compared to that of Classical Economics. I will begin my paper by first addressing my understanding of both economic theories, I will then compare and contrast both theories, and end my paper with my opinions on why I believe Keynesian EconomicsRead MoreClassical Economics And Keynesian Economics1898 Words   |  8 PagesModern Economics is divisible into two identifiable schools of thought: Classical Economics and Ke ynesian Economics. Names such as Adam Smith, Thomas Malthus, Jean-Baptiste Say, among several others are commonly associated with Classical economic thinking; meanwhile, one ‘key’ name associated with the Keynesian model is, as its title suggests, John Maynard Keynes. The goal of each of the two schools of thought is to predict the state of an economy and the appropriate responses of a few chief partiesRead MoreClassical Vs Keynesian Economics1235 Words   |  5 PagesClassical and Keynesian economics are both accepted schools of thought in economics, but each had a different approach to defining economics. The Classical economic theory was developed by Adam Smith while Keynesian theory was developed by John Maynard Keynes. Similarities: One of the most surprising similarities between the two theories is that John Keynes developed his theory based on the Adam Smith’s theory. Keynes did not entirely disagree with Adam Smith but rather, expanded the theory basedRead MoreMacroeconomic Theories Of Macroeconomics And Classical Economics999 Words   |  4 PagesMacroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics. There are two major macroeconomic theories that economists use to describe the economy. Those theories are Keynesian and Classical. Each theory has a different approach to the economic study of monetaryRead MoreThe Theory Of The Classical School1694 Words   |  7 Pages The classical school is one of the economic thoughts; the key assumption of this school is that the market system is the most efficient system in the sense that the unencumbered market mechanism ensures the optimal allocation and utilisation of scarce resources. They also believed that â€Å"Supply creates its own demand.† (The early debate on policy atavism) In other words, in the process of producing output, businesses would also create enough income to ensure that all of the output will be sold.Read MoreEconomic Studies: Quantitative and Qualitative Analysis793 Words   |  3 PagesEconomics studies many different things such as how governments, firms, individuals, and nations make decisions on distributing limited assets to fulfill their unlimited wants. It is broken down into two categories, macroeconomics, and microeconomics. Macroeconomics focuses on the behavior of the economy while microeconomics focuses on and individual as a consumer. Economics also focuses on two different studies known as quantitative and qualitative analysis in which they focus on the distributionRead MoreEconomic Advisement Paper1634 Words   |  7 PagesOption 1: Economic Advisement Paper Brittany McCarty, Jake Vickers, amp; Michelle Williams Learning Team B Eco 372 July 11, 2013 Dr. Samuel Imarhiagbe Two Economic Theories Modernizing over the decades, two main theories support economists, proposals, arguments, and predictions. The first theory is the Classical model perspective and the second theory is the Keynesian model perspective. The first theory promotes a hands-off approach and the second a governmentRead MorePolicy Review And The Lucas Criticisms Essay919 Words   |  4 Pages Policy Review and the Lucas Critiques Orthodox Keynesian economists believe that the change of the money supply will lead to the change of effective demand, and further result in the change of the economy. However, in the monetary economy cycle theories, the expected monetary supply changes will not influence the total economy; the unexpected money supply changes will impact the total economic in short term. In the long term, it merely impacts the changes of general price levels, instead of onRead MoreEssay on Keynesian Revolution1244 Words   |  5 PagesKeynesian Revolution Classical economic theory assumed that a ‘free-market’ economy is a ‘self regulating’ system that continually tends toward a full-employment equilibrium, with optimum economic benefits for everyone. Therefore, the best government economic policy is to ‘excuse itself’ and give utmost freedom to individual enterprise. A key element of the ‘Keynesian revolution’ was its demonstration that these basic assumptions are false, both in theory and practice, and its assertionRead MoreIntroduction. The Rising Unemployment Has Generated Challenges1381 Words   |  6 Pagesimpacts on the communities and economic growth of the country. The prevalence of high unemployment rates in low income communities in the U.S contributes to increased poverty rates, leads to development of social unrest and conflicts, and hinders effective flow of liquidity thus limiting labor mobility (Phelps Zoega, 2002). This paper seeks to study on the effects of the rising unemployment in low income communities using the theories of economics. Theories of Economics Explaining the Effects of Rising