Question

1. What is the main difference between Classicals and Keynesians when it comes to their views of the role of government within a market system?  Does the Classical view call for zero government?  (Yes or No.)  Is the Keynesian view a socialist or communist view?  (Yes or No.)
2. Does the goal of a fair distribution of income or wealth mean that incomes should be distributed equally?  Explain.

Answer 1

Classical believe in Laissez Faire policy which believes in no government intervention or markets adjust automatically because of wage and price flexibility. It is true that the Classical call for zero government intervention in the economy. Keynesian, on the other hand, believes that government intervention is needed to remove recessionary or inflationary gap in the economy. Fiscal policy is needed to restore the economy to its potential level as wages and prices are not flexible in the economy. Keynesian view, is thus, a socialist view as it believes in government intervention in the economy.

The concept of fair distribution of income or wealth means that income distribution should be such that no one is very rich and very poor. This prevents inequality in the economy as the income is distributed equally in the economy. Thus, it is true that fair distribution of income means income should be distributed equally.