Classical And Keynesian Economic Theory

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Classical and Keynesian economic theories translate directly into American politics and fiscal public policy. There are stark contrasts with the Republican’s belief in the classical economic theory and the Democrat’s position to implement fiscal spending based on the Keynesian approach to economic stimulation. This is evident in the presidencies of Ronald Reagan and Barack Obama. The Keynesian approach to influence economic growth has left our country severely in debt without a sound fiscal vision to pay down the national debt to an acceptable level. Both economic theories have their advantages when the economic markets are struggling, finding a balance to debt management and economic soundness is the key to any nation’s economic policy. The classical economic theory is based on the belief of the laissez-faire mentality that government should have very little influence with economic affairs of its citizens. Individuals act on their desires and pursue chooses which allows one to achieve those desires. Based on this premise a countries’ economics would have an ebb and flow, but ultimately take care of itself. Through the natural course of supply and demand, the economy will respond accordingly on its own during times of recession and depression. Classical theory remained popular through the late 19th century. During the rapid growth of the industrial age, the laissez-faire doctrine became insufficient to maintain acceptable unemployment rates and desired level of outputs
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