Classical Vs Keynesian Analysis

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Like many other things in life, it is all about timing, economics is no different. When to take action and when to take no action are the key driving forces between the economic models of Classical and Keynesian theories. While the Classical model predicts success in the long run, the Keynesian model addresses short run activities. (Tucker, 213) The Classical economic theory in its’ simplest form predicts that everything will be ok without anyone doing anything. (Vitez & Demand) It, the economy, will settle at a natural equilibrium through ebbs and flows on its’ own. People will only work jobs that pay the amount that satisfies their desires and people will only purchase the goods they want if the price is reasonable to them. (Vitez & Demand) …show more content…

(Tucker, 213) While large spread trade and intertwining of economies have been in place prior to the great depression, the quickness and amount of interdepended for basic goods had never been so globalized. Globalization has continued since the Great Depression, technology, trade, fiscal policy, and governmental collaboration have all played key roles in making the world a smaller place that where countries are truly dependent on one another. Case in point, look around your home, how many goods are imported from some other country. Now imagine if tomorrow morning all imports were stopped. You would not be able to get the goods you wanted and in some case, the goods you needed. Because companies and societies alike choice to produce products not based entirely on need, but on profitability in response to scarcity, the limited supply with endless wants. (Tucker, 213) Choices based on scarcity leads to producing or preforming the activities that result in the biggest payoff for your effort, some places no longer are self-sufficient and are dependent on others for basic goods and services. (Tucker, …show more content…

(Kahn) This however brings to light the main faults of economics, the ability to truly know where in the economic cycle you are. (Kahn) As most of the predictive measures used are retrospective and the future is uncertain because the majority of peoples’ actions and fears are not based on solid universally accepted facts but on their interpretations of the information intertwined with their experiences and injected with their own optimism and pessimistic views. (Kahn) People are weird, and they do weird things for weird reasons. Economics is a reflection of people’s behaviors, therefor sometimes weird things

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