Keynesian economists and free markets. The Keynesian perspective focuses on aggregate demand. Keynesian economists believe that the macroeconomic economy is more than just an aggregate of markets. One implication of this is that, in the midst of an economic depression, the correct course of action should be to encourage spending and discourage saving. Classical economics places little emphasis on the use of fiscal policy to manage aggregate demand. Keynesian economics and its critiques The Keynesian perspective on market forces They Keynesian economic perspective argues for government intervention in certain cases, but market forces are still valuable. 1. Show transcribed image text. ECON REVIEW QUIZLET This is 3 0 min AP review video from M r. ... Free market economists believe that this will make them profit maximizing and efficient. Expert Answer 93% (27 ratings) Keynes believed that the economy is inherently unstable as it goes through waves of optimism and pessimism from time to time on the part of consumers and investors. As we shall see, in Keynesian economics, the state of animal spirits is vital. Keynes's income‐expenditure model. Keynes stated that if Investment exceeds Saving, there will be inflation. The stickiness of prices and wages in the downward direction prevents the economy's resources from being fully employed and thereby prevents the economy from returning to the natural level of real GDP. View Economics Massive Review Document.pdf from ECON 101 at Bates College. Although the term has been used (and abused) to describe many things over the years, six principal tenets seem central to Keynesianism. Search for: Display Repair Kits. Thus, the Keynesian theory is a rejection of Say's Law and the notion that the economy is self‐regulating. If Saving exceeds Investment there will be recession. Unlike classical economists. Keynesian economics is equipped to teach everyone about surviving an economic depression. Keynesian Economics in a Nutshell. Keynesian economics and the Great depression worked well together, with the former giving ways to avoid and escape the latter. Keynesian economists believe that free markets are volatile and not always self-correcting. The first three describe how the economy works. Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. Fiscal Policy. All Products; Fluke 170 Series Keynesian economics focuses on psychology, uncertainty and expectations in driving macroeconomic decisions and behaviour. Classical theory is the basis for Monetarism, which only concentrates on managing the money supply, through monetary policy. 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