Classical economists think prices and quantities respond to supply and demand and the economy produces its potential output over time. However, Keynesian economists believe pricing and wage rigidities may lower the economy's long-term equilibrium output. What is the Price-wage rigidity?
Classical economists think prices and quantities respond to
Keynesian economics believes that the total spending by the economy drives the aggregate demand in the region. The assumption made by the Keynesian economy highlights that the overall spending made in the private sector along with the government drives the overall economy. It derives overall productivity, and employment and brings in the stability of the economy. By stability, it signifies the ability of the economy to adjust quickly under any uncertain situation.
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