Classical economics versus Keynesian economics
I am trying to make a summary table for teaching macroeconomics. This is simplified, of course, but useful still, I hope: Classical Economics Keynesian Economics Say’s Law Always holds. Only holds when leakages do not exceed injections. Unemployment High unemployment is a structural problem. High unemployment can come from insufficient aggregate demand. Equilibrium Markets equilibrate quickly. Markets may equilibrate slowly. In response to a supply or demand change… A price change will produce a stable equilibrium. The other curve may shift, producing a cascade of changes. In response to a recession… Let the market work things out. The government should engage in stimulus spending. Expectations Market actors' expectations rapidly converge towards a stable equilibrium. One group of market actors' expectations may affect another g...