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Why did Keynes depart from the classical tradition in his approach to economics?
- a)To reinforce the classical tradition.
- b)In response to the Great Depression and the need to theorize long-lasting unemployment.
- c)Due to the dominance of microeconomics.
- d)To emphasize the importance of individual markets.
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Why did Keynes depart from the classical tradition in his approach to ...
Keynes departed from the classical tradition in response to the Great Depression, aiming to theorize about long-lasting unemployment and examining the interdependence of different sectors in the economy.
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Why did Keynes depart from the classical tradition in his approach to ...
Response:
Background:
Keynes departed from the classical tradition in his approach to economics primarily in response to the Great Depression. The classical tradition, rooted in the works of economists like Adam Smith and David Ricardo, emphasized the self-correcting nature of markets and believed that economies would naturally return to full employment levels over time.
Keynesian Revolution:
Keynes, however, challenged this view during the Great Depression when it became evident that economies could experience prolonged periods of high unemployment. His seminal work, "The General Theory of Employment, Interest, and Money," introduced new concepts and theories that diverged from classical economics.
Addressing Unemployment:
Keynesian economics focused on the role of aggregate demand in determining economic output and employment levels. Keynes argued that in times of economic downturns, government intervention through fiscal policy (such as increased government spending) was necessary to stimulate demand and reduce unemployment.
Importance of Macroeconomics:
Keynes shifted the focus of economics from microeconomic principles to macroeconomic analysis. He highlighted the importance of looking at the economy as a whole, rather than focusing solely on individual markets or industries.
Policy Implications:
Keynesian economics laid the foundation for modern macroeconomic policy-making, advocating for government intervention to stabilize the economy during periods of recession or inflation. This departure from classical economic thought was a significant turning point in the field of economics and continues to influence economic policy today.
Background:
Keynes departed from the classical tradition in his approach to economics primarily in response to the Great Depression. The classical tradition, rooted in the works of economists like Adam Smith and David Ricardo, emphasized the self-correcting nature of markets and believed that economies would naturally return to full employment levels over time.
Keynesian Revolution:
Keynes, however, challenged this view during the Great Depression when it became evident that economies could experience prolonged periods of high unemployment. His seminal work, "The General Theory of Employment, Interest, and Money," introduced new concepts and theories that diverged from classical economics.
Addressing Unemployment:
Keynesian economics focused on the role of aggregate demand in determining economic output and employment levels. Keynes argued that in times of economic downturns, government intervention through fiscal policy (such as increased government spending) was necessary to stimulate demand and reduce unemployment.
Importance of Macroeconomics:
Keynes shifted the focus of economics from microeconomic principles to macroeconomic analysis. He highlighted the importance of looking at the economy as a whole, rather than focusing solely on individual markets or industries.
Policy Implications:
Keynesian economics laid the foundation for modern macroeconomic policy-making, advocating for government intervention to stabilize the economy during periods of recession or inflation. This departure from classical economic thought was a significant turning point in the field of economics and continues to influence economic policy today.
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Why did Keynes depart from the classical tradition in his approach to economics?a)To reinforce the classical tradition.b)In response to the Great Depression and the need to theorize long-lasting unemployment.c)Due to the dominance of microeconomics.d)To emphasize the importance of individual markets.Correct answer is option 'B'. Can you explain this answer?
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