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Does Say’s law apply more accurately in the long run or the short run? What about Keynes’ law?

a) True for both Say's and Keynes' laws in the long run
b) True for both Say's and Keynes' laws in the short run
c) True for Say's law in the long run, Keynes' law in the short run
d) True for Say's law in the short run, Keynes' law in the long run

User Stanze
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1 Answer

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Final answer:

Say's law applies in the long run as it presupposes supply and demand increase together over time, whereas Keynes' law is more accurate in the short run, addressing immediate imbalances in demand and supply.

Step-by-step explanation:

Say's law, which posits that supply creates its own demand, tends to apply more accurately in the long run. In this perspective, as an economy's ability to supply goods and services increases, overall demand will generally grow proportionally over a span of years or decades. On the contrary, Keynes' law, which asserts that demand creates its own supply, is considered more accurate in the short run. Keynesian theory highlights that, within a short time frame, the economy can experience fluctuations where demand does not automatically equal supply, often leading to recessions or depressions. Hence, the correct answer to the question is c) True for Say's law in the long run, Keynes' law in the short run. Neoclassical economists traditionally favor Say's law, which aligns with long-term economic trends, while Keynesian economists focus on short-term demand-side factors and believe in counter-cyclical fiscal policies to mitigate economic downturns.

User Tunguski
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