03 ECONOMIC SYSTEMS

03 ECONOMIC SYSTEMS - SECTION 3: CLASSICAL ECONOMIC THEORY...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
SECTION 3: CLASSICAL ECONOMIC THEORY AND DIFFERENT ECONOMIC SYSTEMS
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
CLASSICAL ECONOMIC THEORY CLASSICAL THEORY Natural tendency to move toward full employment No need for fiscal or monetary policy
Background image of page 2
CLASSICAL REASONING Unemployed workers compete against each other Wage rates will decline Lower wages lead to increased profits Increased profits lead to increased employment Full employment will be restored
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
KEYNESIAN ECONOMIC THEORY John Maynard Keynes The General Theory Of Employment, Interest And Money , 1936. No automatic tendency to move toward full employment
Background image of page 4
KEYNESIAN THEORY Unemployment is caused by a lack of sufficient aggregate demand Producers adjust output to satisfy the desires of customers If demand is low, output will be low
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
KEYNESIAN POLICY RECOMMENDATION When aggregate demand is low, government should try to boost aggregate demand
Background image of page 6
KEYNESIAN FISCAL POLICY Other things being equal, an increase in government spending will stimulate the economy Other things being equal, a tax cut will stimulate the economy
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECONOMIC SYSTEM WHAT will be produced? Consumption goods
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/07/2008 for the course ECON 0110 taught by Professor Kenkel during the Spring '08 term at Pittsburgh.

Page1 / 26

03 ECONOMIC SYSTEMS - SECTION 3: CLASSICAL ECONOMIC THEORY...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online