J. M. Keynes believed that the Classical economists were wrong to assume that the U.S. economy in the 1930s would automatically self-correct to a full employment equilibrium which would eliminate involuntary unemployment.

1.What was Keynes's explanation as to why involuntary unemployment could arise and persist for a considerable period of time? Use a 45-degree line diagram to demonstrate Keynes's logic beginning with the 1929 stock market crash andexplain your graphical analysis in words. Be sure to include a description of the multiplier process in your explanation.

2.Classical economists believed that unemployment (a surplus of labor) would not persist in the 1930s due to "price" adjustments such as a change in the price of labor (wage rate) paid to workers in the labor market. Set up an aggregate supply and demand graph that measures the price level (P) on the vertical axis and production (real GDP) on the horizontal axis that shows a recessionary gap due to insufficient aggregate demand. Nowexplain in wordsand demonstrate in your graph how changes in the wage rate paid to workers was expected to "self-correct" the unemployment problem associated with a recessionary gap and bring the economy back to full employment.

3.Explain whether you agree or disagree with the following statement:"The Classical view that more savings is important for generating economic growth and recovery from a recession is borne out by the U.S. experience during the Covid recession."