Keynesian approach to aggregate supply focuses on the short run and the role of demand in determining output and employment levels. Keynesians believe that in the short run, prices are sticky, meaning they do not adjust quickly to changes in demand. Therefore, they argue that changes in aggregate demand, such as government spending or monetary policy, have a direct impact on output and employment levels.
On the other hand, the Classical approach to aggregate supply focuses on the long run and emphasizes the role of supply-side factors in determining output and employment levels. Classical economists believe that in the long run, prices and wages are flexible and will adjust to changes in demand. They argue that government intervention in the economy, such as fiscal or monetary policy, can lead to distortions and inefficiencies in resource allocation.
Overall, the key difference between the Keynesian and Classical approaches to aggregate supply lies in their focus on either short-run demand-side factors or long-run supply-side factors in determining output and employment levels.
3. Differentiate between the Keynesian and the Classical approach to aggregate supply?�
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