What is the difference between the classical approach and the Keynesian approach to fiscal policy?
A) Keynesians believe that natural forces in the economy tend toward full employment, whereas classical economists believe in government intervention.
B) Keynesians and classical economists believe that natural forces in the economy do NOT tend toward full employment.
C) Classical economists believe that the economy will NOT achieve its potential GDP, whereas Keynesians believe that any action of the government will make matters worse.
D) Keynesians believe that government action is needed to stimulate output and employment in order for the economy is to achieve its potential output, but classical economists believe that the economy's natural tendency is to full employment.

Question

What is the difference between the classical approach and the Keynesian approach to fiscal policy?  
A) Keynesians believe that natural forces in the economy tend toward full employment, whereas classical economists believe in government intervention. 
B) Keynesians and classical economists believe that natural forces in the economy do NOT tend toward full employment. 
C) Classical economists believe that the economy will NOT achieve its potential GDP, whereas Keynesians believe that any action of the government will make matters worse. 
D) Keynesians believe that government action is needed to stimulate output and employment in order for the economy is to achieve its potential output, but classical economists believe that the economy's natural tendency is to full employment.

Quizplus · Accepted Answer

The classical approach to fiscal policy relies on the idea that the economy has a natural tendency toward full employment, without the need for government intervention. In contrast, the Keynesian approach believes that government action is necessary to stimulate output and employment in order to achieve the economy's potential output.

What Is the Difference Between the Classical Approach and the Keynesian