Economics Critical Thinking Example

The Keynesian economists and the classical have different views on various economic issues. The difference comes in when it comes to the assumptions they make when coming up with their recommendations. According to the classical economists, prices and wages are not fixed but change with changes in economic conditions. The Keynesians on the other hand argue that wages and prices are fixed and there self adjustment mechanisms cannot solve problems when there are changes in economic conditions. The classical economists make the assumption that all the factors of production are fully utilized hence there is full employment. However, the Keynesians argue that sometimes, the economy may be facing unemployment such that some factors of production remain unutilized.
According to the classical economists, government interference in terms of monetary and fiscal policies is not necessary since the market forces react to restore equilibrium whenever there is disturbance in the economy. However, the Keynesians argue that self adjustment mechanism is very slow or sometimes does not work hence interference in the economy in terms of monetary and fiscal policies are necessary.
Ben Bernanke and the United States administration believe in the Keynesian economics. At no point has the administration decided to let the market operate on its own. What has been observed in government intervention from time to time is government intervention to tackle economic problems. The administration does not believe in full employment and this is why Ben has encouraged deficit spending by the government as a way of stimulating the economy. They believe that increasing the government expenditure will stimulate demand, investment and then people will get jobs. This is an idea of Keynesian economists. The government has varied taxes from time to time to influence economic activities in the United States. The use of these policies show that Ben and the current administration advocate for Keynesian policies.