Classical point of view on depression.
Explanation of Solution
The classical economists’ emphasis the fact that free market leads to an efficient outcome and are self-regulating. They believe that there is wage-price flexibility, which help to maintain full employment in the economy. The classical economists believe that the labor unions have to eliminate; because they prevent the appropriate level of change in wage rate. As a result, the wage rate will reduce and
Unemployment rate: Unemployment rate refers to the percentage of unemployed people to the labor force.
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Chapter 24 Solutions
Macroeconomics (Mcgraw-hill Series in Economics)
- Has the United States economy effectivily recovered from The Great Depression?arrow_forwardThe two principles that make a person a “Keynesian” consist of the ideology that the private economy may not reach full employment and that government spending can spur the economy into filling the gap. Give two examples that may be applied to the real world.arrow_forwardAccording to the classical perspective (the one from the 19th century that I described at the beginning of my first lecture video), what kinds of things could cause recessions or other economic downturns?arrow_forward
- What portions of Keynesian economic theory have the most merits?arrow_forwardThe economic crash that led the dark path into the great depression included overspending and what else ?arrow_forwardDirection: identify the appropriate government policy (Fascal Policy or Monetary Policy) should implement in each economic situation.arrow_forward
- Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen. Is it possible to protect workers from being fired without distorting the labor market?arrow_forwardBriefly describe Keynesian/Demand side economic policy.arrow_forwardCompare the classical economic theory that was used prior to the Great Depression to the Keynesian theory used after the Great Depression. Â Your response must be at least 200 words in length .arrow_forward
- Please talk about what type of policies (i.e. expansionary and contractionary) should be used in the current recession caused by the pandemic. Why?arrow_forwardIf markets do not self-adjust, how can a decline in spending lead to a negative process that ruins an economy?arrow_forwardCould you please explain why the classical economists thought there was no inherent tendency in the market system to overproduction, recession, and depression.arrow_forward
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