Differentiate between the Classical School and the Keynesian School in economics.
The Classical School which was founded by Adam Smith believed in a laissez-faire style of economics where there was little interference with the economy by outside sources. Smith and his contemporaries believed, for the most part that the economy was self-fixing and that to interfere with it was unnecessary and even harmful. The Keynesian school founded by John Maynard Keynes was a reaction the the Great Depression and the amount of time that it was taking for the economy to fix itself. Keynes believed that governments had to intervene in order to get the world out of the Great Depression. He believed that the bad economic times were due to the fact that people weren't spending enough money. Since people had little money to spend, Keynes advocated for governments to spend in order to try to jump start the world economy. He said that if this spending had to be debt driven it was perfectly fine because it would pay off in the future when the economy had gotten better. Keynes' policies were implemented and are still largely used today,
What is the difference between perfect competition and monopolistic competition?
In perfect competition there are many firms, the barriers to entry are low and the products are identical. Therefore firms must be price takers and take the market price regardless of the situation. In monopolistic competition the first two conditions still apply but the firms have some ability to differentiate their products so they have some control over their prices. This affects where each firm is able to produce and what prices they are able to charge.
Explain how GDP and National Income are connected
GDP is the measure of every good and service that a country produced in a given year. It encompasses consumer spending, investment spending, government spending, and exports minus imports. NI is the total amount of income received by a country in a year. It includes income from things like Wages and Salaries, income from rent, interest income, and corporate profits. Other things are usually also accounted for. The two are related because generally speaking with all production comes consumption. All spending is possible because of income and it leads to more income for the producers. Therefore loosely speaking the two should generally equal each other or be fairly close.