📚 Learning Guide
Understanding Task Verbs in Economics
hard

In the context of economic theories, how would you evaluate and contrast the Keynesian and Classical approaches to predicting economic outcomes during a recession?

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Choose the Best Answer

A

Both approaches suggest increasing government spending as the main solution.

B

The Keynesian approach emphasizes aggregate demand, while the Classical approach focuses on supply-side factors.

C

Both approaches predict that market forces will self-correct without government intervention.

D

The Classical approach predicts unemployment will decrease faster than the Keynesian approach.

Understanding the Answer

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Answer

Keynesian and Classical economic theories approach recessions differently. The Keynesian theory suggests that during a recession, government intervention is necessary to boost demand and stimulate the economy. For example, if people are not spending money, the government can increase its spending on projects, which creates jobs and encourages consumers to spend again. In contrast, the Classical approach believes that the economy is self-correcting, meaning that it will naturally return to full employment without government intervention over time. They argue that any government action might disrupt the natural market processes that would lead to recovery.

Detailed Explanation

The Keynesian approach believes that when people spend less, the economy slows down. Other options are incorrect because Some might think both theories agree on spending; This option suggests both theories think the market will fix itself.

Key Concepts

evaluate
contrast
predict
Topic

Understanding Task Verbs in Economics

Difficulty

hard level question

Cognitive Level

understand

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