Comparing neoclassical theory to keynesian theory it is safe...

Comparing neoclassical theory to Keynesian theory, it is safe to say that: a. Neoclassical theory places more emphasis on the government to solve problems, while the Keynesian theory places more emphasis on the market to solve problems. b. Neoclassical theory places more emphasis on the market system to solve problems, while the Keynesian theory places more emphasis on the government to solve problems. c. Neoclassical theory and Keynesian theory both agree that the government must be involved in the economy to achieve full employment. d. None of the above.

Transcript

00:01 Here we are talking about economic history.

00:02 If i had to summarize the difference between neoclassical and kensian economists, sort of briefly, it's that neoclassical people think that the big markets in the economy, like the market for labor and the market for capital, are relatively well efficient and clear.

00:19 The prices can adjust.

00:20 Interest rates can change to get output supplied equal to output demanded, and wages and prices can change to get unemployment relative to close to the, relatively close to the natural rate.

00:32 Kansian people don't think the macro economy is that smooth.

00:35 They think that there are big wage price frictions, and that mean that things like labor markets don't clear at unemployment rates close to the natural rate.

00:45 And they don't think that interest rates are very important, so they don't think that changes in interest rates will actually equate output with potential output in any meaningful sense, right? so let me walk through these.

00:56 A, the neos, want more government.

01:02 This is, of course, wrong.

01:04 This is the exact opposite.

01:07 The neoclassicals think that the big markets in societies work and the kensians don't.

01:13 So the kensians are the ones that think government has a bigger role, right? because the kensians are ones that believe in bigger market failures.

01:23 B, the nios prefer the market to solve problems...

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