The different Schools of Thought

Question 1

Keynes

Answer 1

• rigid labour market
• more govt. spending, especially during a recession
• more work regulations to increase motivation and efficiency
• more unemployment benefits and re-training
• hard to break contracts (higher work security)
• minimum wages increase motivation

Question 2

Classical

Answer 2

• flexible labour market
• less government involvement
• less power for trade unions
• less work regulations
• easier contracts for hiring and firing
• less or low unemployment benefits
• no minimum wages
• is is easier to find jobs - therefore unemployment goes down
• no need for demand-side policies