Your Description of keynesian economics How did Keynes prese

Your Description of keynesian economics. How did Keynes present a new way of looking at macroeconomics and macroeconomic policy and compare the Keynesian to the Classical model

Solution

Keynes presented a new way of look the aggregated supply. For him the prices and salaries were not flexible as the Classical model believed. So instead of the vertical supply in the Classic model, for Kaynes the aggregated supply has a positive slope. This implies that the production can be change and therefore the employment.

On the other hand, in the Classic model the economy was always at full employment, of course it could be some deviations of it, but just in short periods, then the prices and salaries were corrected by the market and converged to equilibrium again.

In the Keynes model, since the production can be alter, the government can interfiere and not let the market fix itself. Through the fiscal and monetary policies the government can incentive the market to keep high production levels and thus employment. This was the big contribution of Keynes, the fact that the governments could interfiere with the economic effects.