ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The fundamental principle of the classical theory is that the economy is self‐regulating. Classical economists maintain that the economy is always capable of achieving the natural level of real GDP or output, which is the level of real GDP that is obtained when the economy’s resources are fully employed.

Detailed explanation-2: -Classical economics refers to the school of thought of economics that originated in the late 18th and early 19th centuries, especially in Britain. It focused on economic growth and economic freedom, advocating laissez-faire ideas and belief in free competition.

Detailed explanation-3: -Classical economics, classical political economy, or Smithian economics is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century.

Detailed explanation-4: -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-5: -Keynesian economics believes that government spending is the most important economic activity. On the other hand, classical economics believes that a self-regulating economy is efficient and there is no need for government intervention.