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1. Compare and contrast the Keynesian and Neo-Classical views of time frame, wage/price flexibility, the Phillips...

1. Compare and contrast the Keynesian and Neo-Classical views of time frame, wage/price flexibility, the Phillips Curve and the advisability of the government trying to manage Aggregate demand.

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Expert Solution

  • Classical economics emphasises the fact that free markets lead to an efficient outcome and are self-regulating.
  • In macroeconomics, classical economics assumes the long run aggregate supply curve is inelastic; therefore any deviation from full employment will only be temporary.
  • The Classical model stresses the importance of limiting government intervention and striving to keep markets free of potential barriers to their efficient operation.
  • Keynesians argue that the economy can be below full capacity for a considerable time due to imperfect markets.
  • Keynesians place a greater role for expansionary fiscal policy (government intervention) to overcome recession

Rahul Sunny answered 2 years ago
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