Econ Essay Example | Topics and Well Written Essays - 3000 words

Econ - Essay Example ics.This approach assumes that when businesses fluctuate, then this is a clear interpretation of the fluctuation in the output’s growth rate instead of a change in the level of output. This statement implies that economics is a misery in that there is a very peculiar of interconnection of markets and they respond in a very surprising manner to the changes in preferences and resources. For example, if a reduction of a product occurs, the price of the commodity goes up and the consumers get an incentive to consume less of the commodity while the suppliers get an incentive to discover more. It is very surprising that increase in the price of one commodity can be the reason of another commodity’s price going up. Therefore, this approach in economics tends to let people understand the invisible side in economics in order to understand the economics world. Keynes a very popular economist stated that he would like to steer the economy while Hayek articulates that he would like to set the economy free. Keynes, had a very strong believe and supported that during the periods of depression or during recession in an economy, the government should spend during the depression period as a way to increase the aggregate demand and to lower the levels of unemployment. He believed that during the period of recession, the government should buy security bonds in order to reduce aggregate demand since this reduces the flow of money amongst the citizens. By doing this, Keynes felt that government spending is a good way of controlling the markets. Hayek, a fellow economist, criticized what Keynes argued that government spending should regulate the demand in the market by arguing that he preferred to set the market in the economy to operate freely. Hayek argued that the market should operate freely without any intervention and correct itself without intervention too. His argument was that intervention by either the government spending or the policies of the central bank in effort to