THREE SCHOOLS OF ECONOMICS [2/19]

CLASSICAL:
important people:

1. adam smith - invisible hand : econ works by itself
2. john b. say - say's law : supply creates demand
3. david rickardo
4. afford marshall

savings(leakage) ; investment(injection)
competition is good
long run econ. will balance @ full employment
AS = AD @ equilibrium
AS determines output
prices and wages flexible downwards
foster laissez faire
trickle down effect: help the rich first and everyone later.
saving inc. w/ interest rate

KEYNESIAN:
important person: 
john maynard keynes

savers ≠ investors
ratchet effect and sticky wages blocks say's law
use fiscal policy
no mechanism in full employment in long run we all dead
econ. not always equal to full employment
government intervention
competition is flawed
AD is key not AS
AD determines own output
demand creates supply
leaks cause constant recession and savings
savers and investors save and invest for difference reasons
savings inverse to interest rate
prices and wages inflexible downward
use stabilizer
expansionary and contractionary

MONETARY:
important people:

1. alan greenspan
2. ben bernanke

fine tuning is needed
voters won't allow contractionary plans
congress can't time policy options
easy $ ; tight $
change required reserves if needed
buy and sell bonds through open market occupation
use interest rates to change discount rate and fed. fund rate