The Difference Between the Classical Approach and the Keynesian Approach

question 41

Multiple Choice

The difference between the classical approach and the Keynesian approach to fiscal policy is

• A)Keynesians believe that natural forces in the economy would tend toward full employment
• B)Keynesians believe that natural forces in the economy would not tend toward full employment,but they were distrustful of government's ability to stimulate the economy
• C)classical economists believe that the economy would not achieve its potential GDP but that any action of the government would make matters worse
• D)Keynesians believe that it may be necessary that government increase aggregate demand so as to stimulate output and employment,if the economy is to achieve its potential output
• E)both the classical economists and Keynesians were equally distrustful of government intervention in the economy

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Definitions:

Income Distribution

The allocation of earned income or revenue to various stakeholders, such as dividends to shareholders or wages to employees.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against an asset since it was put into use, representing how much of its value has been used up.

Allowance

A provision in accounting for a reduction in the value of receivables or inventories, often related to potential bad debts or damaged goods.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.