Classical Macroeconomics

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In this paper, I will be addressing the different types of macroeconomics, with a focus on the classical and the Keynesian models and the differences that exist between them. I will finish the essay with the new economics models that came after the two early mentioned ones, mainly from the 80's.
Before going to the differences, a brief history of the macroeconomics would help understand what each model emphasizes.
The classical model is the oldest model and has its origin since centuries. Probably one of the major contributors to the classical economics is the economist David Ricardo followed by J-B Say among others. The classical theory represents the economy in the long run with the assumption that prices and wages are flexible.
Classical economists believe that the economy regulates itself towards potential output which is equivalent to real GDP when resources are fully employed, therefore for this model, the government intervention is not needed in case of a recession for example.
The Keynesian model became popular after the great depression in 1929 and named originally after the economist J.M Keynes. Blanchard (2017) argued, "The history of …show more content…

2.0., 2012, p. 711). New Keynesians being known for the incorporation of the microeconomics in their macroeconomics field, also have incorporated the main ideas of the monetarist and new classical schools into their formulation of the macroeconomic theory. Blanchard stressed the focus the new Keynesians have for the imperfection in the labor market and argued: "They also shared the belief that much remained to be learned about the nature of imperfections in different markets and about the implications of those imperfections for macroeconomic fluctuations." (Blanchard, 2017, p.

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