Classical Economic Model
Economics theory discusses the classical economic model as the basis for understanding economics. Therefore, you need to understand this fundamental model in order to fully understand economic theory. Paper Masters will make certain it is explained to you thoroughly in a custom research paper on the classical economic model.
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The classical economic model is basically a mathematical-like equation explaining why employment remains full, or at least tends to. It does not explain all the realities and details of an economy, however, which can affect a labor market, the relationship between wages and employment, and unemployment. "The labor market is in a constant state of flux." Individuals do voluntarily leave their jobs to look for better jobs or to get an education so they can get different kinds of work. Many women leaving their jobs to have children or after making a decision to spend more time with young, growing children is an instance of workers voluntarily leaving the workforce. Because of this, "at all times there are some people who are classified as unemployed." The changing group of unemployed is a constant factor in the economy. It is not a drag on the economy because a sizable proportion of it is looking for better jobs and improving their skills. The increased income they will earn in better jobs or with improved skills will add to the wealth of the economy.
Elements of Classical Economic Model - The Keynesian Perspective
There are three main elements involved in typical Keynesian economics:
- Employment
- Government Spending
- Tax Policy
In this Keynesian perspective, government spending coordinated with lower taxes stimulates the economy. This stimulation creates jobs, thus lowering unemployment. Inflation is kept in check by higher output. The competing prices among the higher number of goods keep prices from becoming inflationary. According to the Keynesian theory, the more taxes government takes in from the higher number of workers keeps the government from going into deficit by its spending to stimulate the economy.