Question

Compare how Adam Smith would respond to a downturn in the economy as opposed to John Maynard Keynes. Be sure to support your answer with what you have learned about their economic theories. (8 Points)

Essay writing tips:

1. Use. R.A.C.E. to answer the question. Restate the question, Answer the question, Cite any information it gives you to reference, Explain your answer in more detail or Expand on your answer.

2. If it gives you a quote to read you should reference this quote in your answer.

3. Even if you are given a quote make sure you use prior knowledge when answering the question. Show me what you learned from your lessons about the topic.

4. Double check that you have answered EVERYTHING the question is asking.

5. A paragraph is 5 sentences.

6. This is an essay question. Do not just write a list. Put your answer in essay form.

7. Avoid just giving your opinion on a topic. Always justify your answer with information learned from the lessons.

Answer 1

In an economic downturn, Adam Smith would expect the "invisible hand of the market" to regulate the economy. The term "invisible hand" was coined by Adam Smith in his book "The Wealth of Nations." In it, he explains that free market automatically reaches its own equilibrium, with little to no government intervention.

John Maynard Keynes has a different approach to economic downturns. In the Keynesian theory, he believes that the economy does not self-regulate, and needs a governent interference in order to prevent or minimize economic downturn. According to Keynes, the main cause of economic downturns is insufficent aggregate demand. To reverse this, artificial demand must be created.