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Word Count: 438
Comparisons of Classical and Keynesian thought In the comparison of the two thoughts one must understand that Classical thought is one that has been around longer than Keynessian and it was in all probability the only real school of thought from 1776 to the 1930s The Classical thought is one that had its origins in Britain and with Britishs economists As early as Adam Smith and until the great depression most all economists were Classical economics As a whole they believed that the self-correcting mechanisms of a market economy would continually guide the economy toward full output and full employment Market prices would adjust to restore the economy to full employment and that if a slow down or recession was to occur that it would most certainly be short lived A working economic example of this would be the Great Depression experienced in the 1930s The stock market crash bank failures and a decade of unemployment averaging 20 to a high of 25 1933 caused sever problems This was a crisis not only for the US but the world as well In keeping with the Classical thought a government should do nothing and play a non -active and very passive role in the economy their for the system should work But it did not work Did the Government policys those of the congress and the federal reserve that were in place during this time work This is a Question that is still debated today The opposite approach is the Keynesian thought This school of thought would believe in a more active approach That is the Federal Government and the Federal Reserve should play an important role in attempting to stabilize the economy by fine-tuning that is look for the problem find out what is wrong and fix it Probably the biggest test of
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