Classical & keynesian economics

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This document summarizes and compares classical and Keynesian economics. Classical economics is centered around self-regulating markets that operate at full employment, while Keynesian economics recognizes markets do not always self-adjust and the economy can operate below full employment. Key differences include classical economics believing free markets are always stable versus Keynesian thinking they are unstable. The document also outlines Keynesian principles like markets clearing slowly and government intervention being desirable to stabilize the business cycle through fiscal and monetary policies.

Classical & keynesian
Economics
BY RANGANADH
SIITAM

CLASSICAL ECONOMICS
 Who
 Adam smith,David Ricardo,Alfred Marshal

CENTRAL PRINCIPLE
 The economy is best organised as a self-regulating
system of markets.

Classical economics
 WAGES AND PRICES ARE FULLY FLEXIBLE in

order to clear markets rapidly.

 ECONOMY OPERATES AT FULL EMPLOYMENT

MOST OF THE TIME. Classical Aggregate curve is
vertical

Classical economics
 MINIMAL GOVT INTERVENTION reflecting

distrust of government and belief in its inefficiency.

 UNEMPLOYMENT in the economy is either

Voluntary or due to some External Interference.

Keynesian Economics
 Who
 John Maynard Keynes

CENTRAL PRINCIPLE
The economy often operates at less than full
employment; market system does not self adjust.

Key differences between classical vs keynesian
 IN THE CLASSICAL WORLD
 Free market economies are always stable
 Tending towards full employment & full production

equilibrium
 Free fluctuating pricies in the three macro markets
(Goods, money, labor)
 IN THE KEYNESIAN WORLD
 Free market economies are unstable
 Equilibrium but no reason for full employment/full
production

Keynesian Economics
1. MARKETS CLEAR ONLY SLOWLY, IF AT ALL
A) In a depression or recession, much Employment is

Involuntary.
2. ECONOMY OPERATES LESS OFTEN THAN FULL
EMPLOYMENT, since market don’t clear
3. GOVT INTERVENTION MAY BE DESIRABLE TO
STABILIZE THE BUSINESS CYCLE.
(Fiscal and monetary policies)

Keynesian Economics
 Demand becomes much bigger driving force
 Supply will adjust to demand
 According to Keynes; Demand creates its own

supply”

Keynesian policy Implications
 Under the classical system, government had no role

in management of the economy- “Laissez faire” do
nothing.
 Under Keynes, Government must step into to correct
instability of the economy.
 If the economy faces recessionary gap, govt must increase demand by

spending more; lowering taxes;lowering interest;
 If the economy faces an inflationary gap, govt must reduce demand by
spending less; raise taxes; increase interest rate;

US Federal govt objectives for Economy
 Full employment(1933 & by Law 1946)-Federal govt

took responsibility to ensure the economy functions
at full employment- no more than 5% unemployment

 Economic growth(1950)-Fed Govt took

responsibility to ensure the economy grows at a
consistent and healthy rate-Real GDP at
approximately 4% year
 Price stability (1970) Fed govt took responsibility to
ensure the economy has stable prices- CPI increase
at no more than 3% per year

Classical & Keynesian Economics
 The economy can experience recessionary gaps or

inflationary gaps
 No reason why economy must come to equilibrium
at full employment
 Aggregate supply will always adjust to Aggregate
demand not vice versa
 Govt has a role and responsibility as maximizing
entity to manage the economy

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原版一模一样【微信：741003700 】【(msvu毕业证书）圣文森山大学毕业证成绩单】【微信：741003700 】学位证，留信学历认证（真实可查，永久存档）原件一模一样纸张工艺/offer、在读证明、外壳等材料/诚信可靠,可直接看成品样本，帮您解决无法毕业带来的各种难题！外壳，原版制作，诚信可靠，可直接看成品样本。行业标杆！精益求精，诚心合作，真诚制作！多年品质 ,按需精细制作，24小时接单,全套进口原装设备。十五年致力于帮助留学生解决难题，包您满意。本公司拥有海外各大学样板无数，能完美还原。 1:1完美还原海外各大学毕业材料上的工艺：水印，阴影底纹，钢印LOGO烫金烫银，LOGO烫金烫银复合重叠。文字图案浮雕、激光镭射、紫外荧光、温感、复印防伪等防伪工艺。材料咨询办理、认证咨询办理请加学历顾问Q/微741003700 【主营项目】一.毕业证【q微741003700】成绩单、使馆认证、教育部认证、雅思托福成绩单、学生卡等！二.真实使馆公证(即留学回国人员证明,不成功不收费) 三.真实教育部学历学位认证（教育部存档！教育部留服网站永久可查）四.办理各国各大学文凭(一对一专业服务,可全程监控跟踪进度) 如果您处于以下几种情况： ◇在校期间，因各种原因未能顺利毕业……拿不到官方毕业证【q/微741003700】 ◇面对父母的压力，希望尽快拿到； ◇不清楚认证流程以及材料该如何准备； ◇回国时间很长，忘记办理； ◇回国马上就要找工作，办给用人单位看； ◇企事业单位必须要求办理的 ◇需要报考公务员、购买免税车、落转户口 ◇申请留学生创业基金留信网认证的作用: 1:该专业认证可证明留学生真实身份 2:同时对留学生所学专业登记给予评定 3:国家专业人才认证中心颁发入库证书 4:这个认证书并且可以归档倒地方 5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息 6:个人职称评审加20分 7:个人信誉贷款加10分 8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才办理(msvu毕业证书）圣文森山大学毕业证【微信：741003700 】外观非常简单，由纸质材料制成，上面印有校徽、校名、毕业生姓名、专业等信息。办理(msvu毕业证书）圣文森山大学毕业证【微信：741003700 】格式相对统一，各专业都有相应的模板。通常包括以下部分：校徽：象征着学校的荣誉和传承。校名:学校英文全称授予学位：本部分将注明获得的具体学位名称。毕业生姓名：这是最重要的信息之一，标志着该证书是由特定人员获得的。颁发日期：这是毕业正式生效的时间，也代表着毕业生学业的结束。其他信息：根据不同的专业和学位，可能会有一些特定的信息或章节。办理(msvu毕业证书）圣文森山大学毕业证【微信：741003700 】价值很高，需要妥善保管。一般来说，应放置在安全、干燥、防潮的地方，避免长时间暴露在阳光下。如需使用，最好使用复印件而不是原件，以免丢失。综上所述，办理(msvu毕业证书）圣文森山大学毕业证【微信：741003700 】是证明身份和学历的高价值文件。外观简单庄重，格式统一，包括重要的个人信息和发布日期。对持有人来说，妥善保管是非常重要的。

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Classical & keynesian economics

1. Classical & keynesian Economics BY RANGANADH SIITAM

2. CLASSICAL ECONOMICS  Who  Adam smith,David Ricardo,Alfred Marshal CENTRAL PRINCIPLE  The economy is best organised as a self-regulating system of markets.

3. Classical economics  WAGES AND PRICES ARE FULLY FLEXIBLE in order to clear markets rapidly.  ECONOMY OPERATES AT FULL EMPLOYMENT MOST OF THE TIME. Classical Aggregate curve is vertical

4. Classical economics  MINIMAL GOVT INTERVENTION reflecting distrust of government and belief in its inefficiency.  UNEMPLOYMENT in the economy is either Voluntary or due to some External Interference.

5. Keynesian Economics  Who  John Maynard Keynes CENTRAL PRINCIPLE The economy often operates at less than full employment; market system does not self adjust.

6. Key differences between classical vs keynesian  IN THE CLASSICAL WORLD  Free market economies are always stable  Tending towards full employment & full production equilibrium  Free fluctuating pricies in the three macro markets (Goods, money, labor)  IN THE KEYNESIAN WORLD  Free market economies are unstable  Equilibrium but no reason for full employment/full production

7. Keynesian Economics 1. MARKETS CLEAR ONLY SLOWLY, IF AT ALL A) In a depression or recession, much Employment is Involuntary. 2. ECONOMY OPERATES LESS OFTEN THAN FULL EMPLOYMENT, since market don’t clear 3. GOVT INTERVENTION MAY BE DESIRABLE TO STABILIZE THE BUSINESS CYCLE. (Fiscal and monetary policies)

8. Keynesian Economics  Demand becomes much bigger driving force  Supply will adjust to demand  According to Keynes; Demand creates its own supply”

9. Keynesian policy Implications  Under the classical system, government had no role in management of the economy- “Laissez faire” do nothing.  Under Keynes, Government must step into to correct instability of the economy.  If the economy faces recessionary gap, govt must increase demand by spending more; lowering taxes;lowering interest;  If the economy faces an inflationary gap, govt must reduce demand by spending less; raise taxes; increase interest rate;

10. US Federal govt objectives for Economy  Full employment(1933 & by Law 1946)-Federal govt took responsibility to ensure the economy functions at full employment- no more than 5% unemployment  Economic growth(1950)-Fed Govt took responsibility to ensure the economy grows at a consistent and healthy rate-Real GDP at approximately 4% year  Price stability (1970) Fed govt took responsibility to ensure the economy has stable prices- CPI increase at no more than 3% per year

11. Classical & Keynesian Economics  The economy can experience recessionary gaps or inflationary gaps  No reason why economy must come to equilibrium at full employment  Aggregate supply will always adjust to Aggregate demand not vice versa  Govt has a role and responsibility as maximizing entity to manage the economy

12. Classical & Keynesian Economics

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