Italy Factfile
Keynesian economic theory can be seen as a government deploying supply-side policies and increasing government spending to try and boost an economy’s GDP. For example, the government could increase spending in education, to increase the general employability of an economy for future years, to reduce unemployment levels in the future, reducing the amount paid in unemployment benefits by a government and to increase economic prosperity, wealth and consumer spending for an economy, so that the government will recoup the money spent in taxes and GDP will increase. The government could also spend money on the public sector of the economy; such as if the government improves the health service by building more hospitals, jobs will be created, e.g. nurses and doctors; reducing unemployment levels, and along with this, the public will be healthier due to the higher standards of health services and hospitals available, reducing sick days / illness and increase productivity within the economy and GDP. The approach was developed in the early 20th century, when neoclassical policies seemed to be failing once the great depression hit in the 1920s. [Wisegeek.com, 2011]
Neoclassical economics is more about individuals maximising profit and utility. For example, neoclassical economists would think that a government would want firms and business within an economy to be purely profit-driven and based, rather than thinking about employment and unemployment necessarily. Neoclassical economics see economics as a science, and tend to use more mathematical formulas when analysing economical situations. Criticism of the neoclassical theory tend to be the fact that neoclassic economists assumptions are taken for granted and unrealistic, treating economics as a science tends not to represent real situations. [Investopedia, 2012]
Government macroeconomics policy using the Keynesian theory would be more supply-side, whereas Neoclassical economists tend to be more demand and supply
Neoclassical economics is more about individuals maximising profit and utility. For example, neoclassical economists would think that a government would want firms and business within an economy to be purely profit-driven and based, rather than thinking about employment and unemployment necessarily. Neoclassical economics see economics as a science, and tend to use more mathematical formulas when analysing economical situations. Criticism of the neoclassical theory tend to be the fact that neoclassic economists assumptions are taken for granted and unrealistic, treating economics as a science tends not to represent real situations. [Investopedia, 2012]
Government macroeconomics policy using the Keynesian theory would be more supply-side, whereas Neoclassical economists tend to be more demand and supply