QUESTION\
300 words
Warning: The answers to both are right in the text; if you go searching the internet you will probably get it wrong and lose points.
Choose one of the following topics.
Topic 1. “If production results in income and income is the source of spending, it would seem that the production of a full-employment economy would automatically guarantee enough spending to sustain itself. How, then, can unemployment occur?” Explain in detail (hint: review Say’s Law as explained in the chapter).
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Topic 2. Contrast in detail the classical and Keynesian views of unemployment. Explain in detail and consider the role of flexible versus 'sticky' prices.
Video Reference
Save your work as a Word (doc or docx) file and upload it here. Use 1" margins, double spacing, and 12 point Arial, Times New Roman, or similar. video link https://www.youtube.com/watch?v=17wni5Jmh-w&feature=emb_title
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| Subject | Economics | Pages | 2 | Style | APA |
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Answer
CLASSICAL AND KEYNESIAN VIEWS OF UNEMPLOYMENT
In the field of employment, a number of theories have been adopted to explain the causes and forms of unemployment. However, variations have always been realized when such arguments arise. In the other hand, labor cost has been another issue of consideration as it influences inflation that in turn affects the extent of labor supply. Addressing this issue has however remained debates given the classical and Keynesian arguments. This paper will provide analysis to contrast in detail the classical verse Keynesian views of unemployment. Further, the paper will consider the roles of flexible verse sticky prices.
With reference to Keynesian enthusiasts, the government is concerned about the employed at the expense of neglecting possible inflations that may arise. Additionally, this unemployment theory focuses on workers' ability to contribute to the economy without considerations to considerations to cost of goods or the ability to buy. However, the classical economist expresses concerns on unemployment with specific considerations to prices together with inflation. According to the classical argument, inflation poses a potential threat to the economic growth of a country. Since the economy focuses on full employment, unemployment is the government's interventions in a free market.
Price stickiness is entailed resistance of the market prices to changes even though the entire economy predicts different optimal pricing. In the employment context, price stickiness helps in maintaining constant wages by employers even if they are not sustainable; this controls the inflation levels. Flexible prices indicate the market's ability to adjust to flexible wage rates as a response mechanism to a labor supply shortage. The condition of flexibility in wages is essential for microeconomics, in the long run, to analyze the employment trends to adjust and respond effectively. Thus, price flexibility holds that analysis of the labor supply trend is essential for a free market.
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References
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Using Keynesian Aggregate Expenditure Model. Retrieved from: https://www.youtube.com/watch?v=17wni5Jmh-w&feature=emb_title