Compare the Classical and Keynesian models, making the reference to,a) The labour market, b) The AS curve, c) The AD curve, d) The relationship between real and monetary variables.

... Compare the Classical and Keynesian models, making the reference to a) The labour market b) The AS curve c) The AD curve d) The relationship between real and monetary variables. 1st lecture until 08/10/03 Plan Classical a) The labour market b) The AS curve c) The AD curve d) The relationship between real and monetary variables. Keynesian a) The labour market b) The AS curve c) The AD curve d) The relationship between real and monetary variables. Introduction Classical economics uses the fallacy of composition to aggregate individual components. It believes that microeconomic foundations are necessary. However, in contrast, Keynesian economists believe the behaviour of the whole economy to be different from the behaviour of individual components acting individually. It believes the whole economy has its own identity and therefore requires n a new theory. Keynesians believe, that by itself the economy may not produce optimum outcome and therefore government intervention is needed. Classical Useful because * Background to Keynesian revolution * Basis for new-classical models Based upon * Say's

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