Classical+and+Keynesian+Views+of+Aggregate+Supply


 * 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.**