The position of Keynes and classical school about wages, prices, and Say’s law of market.
Explanation of Solution
According to the classical economists, the economy is always self regulating and does not need any intervention of the government to control its activities other than providing military support. Thus, they demanded the Laissez-Faire economy where the economic transactions of the economy are free from the government regulations, tariffs, and interventions. Thus, the wages and prices are freely flexible under the classical ideology and Say's law of market states that the supply always creates its own demand leading to equilibrium between the demand and supply.
However, according to Keynes, the economy should not be allowed to freely fluctuate the prices and wages, as it will take long years to derive a new equilibrium as well as the
Thus, the classical economists argued for the Laissez-faire economy with the strong power to Say’s law market, whereas the Keynes does the inverse.
GDP: The GDP is the
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Macroeconomics
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