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27 December, 18:34

Two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment. Jones says that it is better to take a "hands-off" approach. Which of the following is most likely to be true? A. Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. B. Smith and Jones are most likely both classical economists with a few minor differences of opinion. C. Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. D. Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. E. none of the above.

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  1. 27 December, 19:22
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    D. Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist

    Explanation:

    The Keynesian approach was proposed by John Keynes in the twentieth century in response to the mainstrean theory of the classics.

    Classical economists preach that the economy adjusts itself, so that the government should not interfere with the labor market, that is, the hands-off view, like Jones.

    On the contrary, Keynesian economists believe that the government has the power and influence to alter the reality of the labor market in situations of structural unemployment. This is what Smith advocates in this exercise. Therefore, alternative D is correct.
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