In your post,
Compare and contrast classical economics and Keynesian What are the major differences between them?
Which model would you prefer? You may already prefer one because you are defending your school. Thoroughly explain your reasoning.
As a classical economist or a Keynesian economist, what would you do for the current S. economy?
Your initial post should be a minimum of 300 words.
Guided Response: Respond substantively (a minimum of 100 words) to at least two of your classmates posts. What is different or similar between your post and your classmates posts? What advice could you offer your classmates? Substantive responses use theory, research, and experience or examples to support ideas and advance the class knowledge on the discussion topic.
Student response:
Since my last name is Hughes, I am to form an argument defending the Classical school. Amacher (2019)Classical economists believed that the interaction of labor supply and labor demand determines the real wage and the level of employment. So being a classical economist I believe that the supply should be what we focus on. That will lead to full production and plenty of employment opportunities.
Keynesian economists believe in the opposite of the Classical economist. They believe that we should focus on the demand and not the supply. If we focus on the demand, then the supply will automatically follow. Amacher (2019) Keynesian model says that employment is based on output.
I would prefer the Keynesian method. I feel that it makes sense for a more stable economy. Focusing on the demand I feel is more accurate. A company could make a thousand new phones but if they cannot sell one then the fact that they made a thousand doesnt mean much. If you go off the fact that a company sold a thousand phones you know that the company will automatically ramp up production because they want to meet the demands. I feel like this makes more sense. I also feel like it will save companies money on inventory that may never sell if they use the Keynesian method.
As a classical economist, I really am not sure what I would do for the current economy. Maybe ramp up supply so prices could be lower. I feel that the state of our economy is struggling because of inflation. People are struggling to make ends meet when they can barely afford to manage a household. If we could lower the prices of items that are needed for everyday living, then we would see that households would start spending more money and ramp up our economy.
Second student response: Today I will be explaining the classical economists view of macroeconomics. The Classical school is mainly centered around three themes: Says Law, self-regulating markets, and the quantity theory of money.
Says Law, named after 19th Century French economist Jean-Baptiste Say, is the idea that supply creates its own demand. This means that the production of goods and services will generate income that is equivalent to the value of the products that are produced. One could argue that this does not work if households decide to save rather than spend all their income on consumption. However, if these savings are held at banks, they could inject them back into the economy via investment.
Classical economists hold that the forces of the product market, labor market, and credit market would bring an economy to equilibrium. If markets can operate freely, full employment would be a near guarantee if given enough time. Of course, occasional hiccups like overproduction and unemployment will arise, but the presence of these self-regulating markets will ensure that they are resolved by creating a new equilibrium by shifting supply or demand.
Even with the markets regulating themselves, an explanation is still needed for how the price level will be determined. To do this, classical economists say the price level is determined by the quantity theory of money and the equation of exchange. This states that any changes in the price level are proportional to the change in the money supply. This is reflected in a relationship called the equation of exchange, which states that the money supply times the velocity of money is equal to the price level times the level of output.
Keynesian economists advocate for a higher level of government involvement to prevent disasters such as the Great Depression, and I agree that the government should step in in drastic situations such as that. However, this involvement needs to be solely limited to fixing the economy, and not furthering a larger government regime.
