"The market is not a self-regulating mechanism because prices are not flexible and nothing ensures that planned leakages will be offset by planned injections.To bring the economy out of depression and end high unemployment, some way of stimulating aggregate demand is required.This can be best achieved by a combination of government deficit spending and regulation of tax rates." Which school of thought does this statement best represent?
A)Rationalist economics
B)Monetarist economics
C)Classical economics
D)Keynesian economics
E)Marxist economics

Question

Quizplus · Accepted Answer

The statement best represents Keynesian economics as it emphasizes the need for government intervention in the economy to stimulate aggregate demand and reduce unemployment during a depression. Keynesian economics is characterized by the belief that government intervention is necessary to stabilize an economy during a recession or depression, whereas classical economics emphasizes the belief that markets are self-regulating and should be left alone to correct themselves. Monetarist economics emphasizes the importance of controlling the money supply as the key to stabilizing the economy, while Marxist economics proposes the need for a socialist revolution to overthrow capitalism. Rationalist economics is not a recognized school of economic thought.

"The Market Is Not a Self-Regulating Mechanism Because Prices Are