Question

Classical economists and Keynesian economists disagree about what the government should do when the economy experiences high levels of unemployment. A big difference between the two theories is that:

Keynesian theory emphasizes correcting the economy on its own because of the three lags, while classical economic theory supports economic changes that benefit consumers of a country.

Keynesians emphasize increases in total spending (aggregate demand), while classical economists emphasize increases in production (aggregate supply).

All of the listed answers are differences between Keynesians and classical economists.

Classical economists emphasize increases in short-term spending, while Keynesians support long-term savings.

Answer 1

With respect to government role during period of high levels of unemployment, views of classical economists and keynesian economists differ.

Keynesian economists are focused on the change in aggregate demand to reduce unemployment as they state that it is the lack of effective demand which is responsible for high unemployment.

On the other hand, classical economists focus on change in aggregate supply to reduce unemployment as they believe that too little production is responsible for high unemployment.

So,

A big difference between the two theories is that Keynesians emphasize increases in total spending (aggregate demand), while classical economists emphasize increases in production (aggregate supply).

Hence, the correct answer is the option (2).