Answer to Question #224785 in Macroeconomics for Lisa

Question

We call the model of income determination developed in this chapter a Keynesian one. What makes it Keynesian, as opposed to classical?

Answer 1

Classical economists believed that an economy's market can bring it to equilibrium. The demand and supply factors assist the market in reaching equilibrium, but market meddling causes the economy to depart from the equilibrium point. Another school of thought, known as "Keynesian economics," contends that government intervention in the economy is required to achieve equilibrium.