macro economics question
Learning Goal: I’m working on a macro economics question and need an explanation and answer to help me learn.Macroeconomics before Keynes is sometimes called “classical” economics. According to classical economics:An economy as a whole always functions at a level of full employment, due to free play of market forces in a free economy.
Supply creates its own demand.
This classical doctrine of automatic full employment was largely accepted until the early 1930s, when the Great Depression Occurred. The Great Depression of 1929-1933 exploded the myth that an automatic working of market mechanisms would ensure an equilibrium level of income consistent with full employment of resources. There was a persistent fall in the level of output, income, and employment during the Great Depression, even though the United States and other western countries were highly industrialised, with well-developed basic industries, electric power, means of transport and communication, banks, and other financial institutions. The Classicals failed to explain this situation during The Great Depression.