What was the dominant thinking in economics before keynes?
i. All the labourers who are ready to work will find employment
ii. All the labourers who are ready to work will not find employment
iii. All the factories will be working at their full capacity
iv. All the factories will not be working at their full capacity
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: i,iii
Before John Maynard Keynes, the dominant thinking in economics was based on classical economic theory, which assumed:
- i. All the labourers who are ready to work will find employment
- iii. All the factories will be working at their full capacity
This classical view, often associated with economists like Adam Smith and David Ricardo, held that markets, including the labor market, were self-correcting. It was believed that any unemployment or underutilization of resources (like factories) would be temporary and that full employment and full capacity utilization would be achieved naturally through the market mechanisms.