ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The government should deficit spend in a recession.
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Allowing the economy to self correct is the smart solution to any economic problem
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John Keynes is my brother from another mother!!!
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Central planning of economies is the surest way to ensure success.
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Detailed explanation-1: -The Scottish economist and philosopher Adam Smith (1723–1790) is widely regarded as the father of modern economics and the classical theory of economics. Smith believed that markets are largely self-correcting.
Detailed explanation-2: -The classical economists believe that the market is always clear because price would adjust through the interactions of supply and demand. Since the market is self-regulating, there is no need to intervene. Economists who advocate this approach to macroeconomic policy are said to advocate a laissez-faire approach.
Detailed explanation-3: -Answer and Explanation: The correct option is: (a) Government policies do not affect economic activity. Classical Economists would agree that government policies do not affect economic activity whatsoever as they believe that the market should be left to operate on the forces and demand and supply.
Detailed explanation-4: -Stabilizing the economy For example, Keynesian economists would advocate deficit spending on labor-intensive infrastructure projects to stimulate employment and stabilize wages during economic downturns. They would raise taxes to cool the economy and prevent inflation when there is abundant demand-side growth.