Which of the following is a difference between John Maynard Keynes and the classical economists?Choose one answer. a. Keynes did not believe that unemployment was a serious long-term problem; the...

Which of the following is a difference between John Maynard Keynes and the classical economists?

Choose one answer.

a. Keynes did not believe that unemployment was a serious long-term problem; the classical economists did.   b. Keynes did not believe that the economy was always in equilibrium; the classical economists did.   c. Keynes did not believe that the economy necessarily settled at full employment; the classical economists did.   d. Keynes believed that the economy was always in equilibrium; the classical economists did not.   e. Keynes believed that a general glut of output was a good thing for the economy; the classical economists believed a glut created an unemployment problem for the economy.

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Betty Wells eNotes educator | Certified Educator

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According to classical economic theory, as exemplified in Adam Smith’s Wealth of Nations, published in 1776, the market is self-regulating and achieves equilibrium when it is free and without government intervention. He said that market forces are an invisible hand and that supply and demand, when free, are based on rational choices that automatically keep them at equilibrium. Self-interest on the part of both consumers and suppliers results in maximum utility and maximum profit, and resources are allocated on this basis. The equilibrium is achieved through competition among suppliers to attract consumers. This invisible hand of supply and demand determines equilibrium for the production and price of goods and for the distribution of income.

John Maynard Keynes developed his economic theories during the Great Depression of the 1930s. In 1936 he published The General Theory of Employment, Interest and Money. This theory states that the market economy tends to be unstable and volatile, which leads to recession and inflation. To minimize this, governmental action is needed in monetary and fiscal policy to restore equilibrium.

Therefore, in regard to your question, the correct answer is b. Keynes did not believe the market was always in equilibrium; the classical economists did.

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pohnpei397 eNotes educator | Certified Educator

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The best answer here is C. 

The main claim of classical economists is that the economy is self-correcting.  If there comes to be too much unemployment or too much inflation, the economy will fix itself without any need for government intervention.  This means that the classical economists believe that the economy settles at an equilibrium with full employment while Keynes believes that the economy can get stuck well below full employment and will need government intervention to get it back to full employment.  This is why Keynes is seen as an advocate of government intervention while classical economists believe in laissez-faire.

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