In: Economics
a) Classical Model
b) Keynesian Model
c) Supply-side Model
Government Spending- Education & Infrastructure
Classical Model
The classical model of economics calls for the free government
market where the intervention of government is literally denied.
The model suggests that the market itself can find the demand and
supply with free market policies. Supply creates its own demand.
So, the aggregate demand and supply is not at all depended on
governmental spending. The aggregate demand and supply curves have
the nature of forming equilibrium and AS/AD without the spending or
investment from the part of government. So an increase in
government spending on education and infrastructure cannot shift or
change the aggregate demand or supply curve since the model do not
include the concept of governmental intervention.
Keynesian Model
The model calls to an increased demand which could improve the
economy. Keynes suggests the idea of more to demand thus expanding
the economy through a cyclic process. Keynes also demands the need
of governmental intervention to stimulate the demand-supply
process. An increased government spending on education and
infrastructure in the Keynesian model could increase the demand and
thus supply leading to a change in the aggregate supply and demand
curve leading to an economic growth.
Supply Side Model
The model suggests the growth of an economy through supply side
factors. As, Keynesian model suggests the demand driven economy,
supply side suggests the supply driven economy. Economy could grow
on the basis of the supply or its level of production. A government
spending in education and infrastructure through lowering taxes and
regulations could help the economy to supply further and attain
better aggregate supply and demand situations.