Comparison of Classicism and Keynesianism

Comparison of Classicism and Keynesianism

Keynesianism

1. Short-run equilibrium

2. Saving is a vice

3. The function of money is a medium of exchange on the one side and a store of value on the other side.

4. Macro approach to national problems

5. State intervention is advocated.

6.  Applicable to all situations – full employment and less than full employment.

7. Capitalism has inherent contradictions

8. Budgeting should be adjusted to the requirements of economy.

9. The equality between saving and investment is advanced through changes in income.

10. Rate of interest is determined by the demand for and supply of money.

11. Rate of interest is a flow.

12. Demand creates its own supply.

13. Rate of interest is a reward for parting with liquidity.

Classicism

1. Long-run equilibrium

2. Saving is a social virtue.

3. The function of money is to act as a medium of exchange

4. Micro foundation to macro problems

5. Champions of Laissez-fair policy

6. Applicable only to the full employment situation.

7. Capitalism is well and good.

8. Balanced budget

9. The equality between saving and investment is achieved through changes of rate of interest.

10. Rate of interest is determined by saving and investment.

11. Rate of interest is a stock.

12. Supply creates its own demand.

13. Rate of interest is a reward for saving.

After learning so much about the theories of employment and income, it is pertinent to look at what is employment multiplier.