Comparing and Contrasting Keynesian & Classical Economics Essay

Economics studies the monetary policy of a government and other information using mathematical or statistical calculations. Fiscal information is analyzed in order to make judgments and inferences from the information provided. There are two economic schools of thought which take different approaches to the economic study of monetary policy, consumer behavior and government spending. Basic Theory (Paragraph 2): This paragraph outlines major some of the differences between Classical and Keynesian economic theories. Classical theorist were rooted in the concept of Laissez faire market which requires little to no government intervention and allows individuals to make decisions, unlike Keynesian economics, where the public and government is heavily involvement in the decision making process in regards to economics. Classical economists also used the value of objects to determine prices in the market unlike Keynesians who believed that the demand was what influenced the market. Keynesians also relies heavily on the theory that the nation’s monetary policy can affect a company’s economy. Government Spending (Paragraph 3): Classical economists do not believe that government spending has a major impact on the nation’s economic growth, yet that consumer spending and business investments had more of an impact. Classical economists believed that government spending would stunt the economy’s growth by increasing the public sector and decreasing the private sector. In contrast, Keynesian economist did in fact believe that consumer spending and business investments helped the economy, but also believed that government spending played an important role in boosting and could possibly even take the place of the former and still continue to result in economic growth. Short vs. Long-term Affects (Paragraph 4): Classical economists focused on creating long term solution for economic problems. They take into account the effects of inflation, government regulation, taxes. They also consider how current policies and new economic theory will distort the free market environment. Keynesian economics focus more on immediate results in economic theories. Keynesians focus on short-term needs as well as policies, and consider how the result can affect the economy immediately.