Question

The keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on ________.

Answer 1

The Keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on short-term fluctuations caused by business cycles.

Neoclassical economics is long-term oriented. Key policies include: Governments should focus on keeping long-term growth and inflation under control, rather than worrying about a recession or cyclical unemployment.

Aggregate demand is a useful tool for controlling inflation.

The Keynesian model focuses on using aggressive government policies to manage aggregate demand and combat or prevent recessions. Keynes developed his theory in response to the Great Depression and was highly critical of early economic theory, which he called classical economics.

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