Classical Views of Aggregate Supply
This theory states that the economy is self regulationg, the classical economists maintain the economy is always capable of achieving the natural level of real GDP. a perfect competitive market will return to equilibruim( the natural rate of umemployment)
Aggregate supply is potential GDP which is actual GDP. this means full employment equilibrium( no cyclical unemployment)
only way to have economic growth is to shift th epotential GDP curve. This theory didnt work during the great depression.
Keynesian Views of Aggregate Supply
big business and labour unions, wages, and prices tend to be "sticky". this theory didnt work during stagflation of 1970s.
it is the governments job to smooth out the bumps in the business cycles. intervention would come in the form of government spending and tax breaks in order to stimulate the economy.