Comparison of Classicism and Keynesianism

Comparison of Classicism and Keynesianism Sl.No Keynesianism Classicism . Short-run equilibrium Long-run equilibrium . Saving is a vice Saving is a social virtue. . The function of money is a medium of exchange on the one side and a store of value on the other side. The function of money is to act as a medium of exchange . Macro approach to national problems Micro foundation to macro problems . State intervention is advocated. Champions of Laissez-fair policy . Applicable to all situations – full employment and less than full employment. Applicable only to the full employment situation. . Capitalism has inherent contradictions Capitalism is well and good. . Budgeting should be adjusted to the requirements of economy. Balanced budget - - Theories of Employment and Income . The equality between saving and investment is advanced through changes in income. The equality between saving and investment is achieved through changes of rate of interest. . Rate of interest is determined by the demand for and supply of money. Rate of interest is determined by saving and investment. . Rate of interest is a flow. Rate of interest is a stock. . Demand creates its own supply. Supply creates its own demand. . Rate of interest is a reward for parting with liquidity. 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.