Question

1] Explain how the Great Depression weakened the popularity of classical economics and opened the way to Keynesian economics.

[2] What is the difference between a vertical, a horizontal, and a conglomerate merger?

[3] What is utility, and how is it related to maximizing economic well-being when consuming goods and services? Also, what must an individual balance to maximize the satisfaction from earning income?

[4] How must expenditures be allocated if an individual is to maximize satisfaction from purchasing goods and services?

Answer 1

1:- The classical theory of Employment is based on January. B. Say's the law of market, I,e., supply creates its own demand.

According to this law, a. Economy is always at full employment level (supply creates its own demand) because factor income is generated in equal value of output.

b. No possibility of over or under production.

The great depression of thirties proved this law impractical and false because millions of people became unemployed due to deficit aggregate demand. Classical economist believed in laissez-faire(non-interference of government). Keynes challenged the classical law, he advocated role of government expenditure in boosting aggregate demand during depression.