Compare And Contrast Classical And Classical Model

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The classical model: The classical model was very much famous till the year of 1930s. Typically the world was running with the very idea of classical model of economic growth till the time of Great Depression. As per the classical economist the government should not interfere in the market. Because classical economists do believe that the market itself operates the supply and demand. X AS Price level…show more content…
The Keynesian Model pointed out that it may be self-correcting as same as the classical economists has pointed out but that was actually taking way much more long. In fact, the people have been deprived and suffering from having jobs, so therefore the scholar Keynes proposed that the Government should intervene in the economy in order to provide jobs to the people in a very short run period because long run may not come. The Behavior of Prices: Here in the long run the prices are completely flexible and these can respond to the supply or demand whereas in the short run the prices are sticky as per the scholar Keynes. In the long run period of time the 5% reduction in the supply of money reduces the whole price. While the output as well as employment seems to remain the same. Thus finally we come to know that the classical model does a good job after explaining the economy in a very long run period in where typically full employment will be there for all the people. Whereas the Keynesian model also does a good job by explaining typically what happens in the short run period of time, when there is depression and at the same time people are completely left out from the
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