CLASSICAL

Followers
-Adam Smith
-J.B. Say
-David Ricard
-Alfred Marshall

Say's Law

-Supply creates own demand
-Production = Income = Spending
-Underspending unlikely
-Whatever output produced will be demanded

Savings and investment
-Savings = Investment income
-Savings (Leakage) = Investment (Injection)

Loan able Funds Market

Wage/Price Flexibility
-Downward

Supply Curve
-Vertical

Output and Employment
-Determined by AS

Unemployment
-Rarely exists because of wage/price flexibility
-Cause: external (war)

Aggregate Demand
-Determines PL
-Stable if money supply is stable

Basic equation

-MV = PQ
-1965 - 1972

Role of government
-Monetary policy maintains steady money supply
-Laissez-faire is best
-Self regulating economy

Inflation
-Too much money

How long the short run is
-Short time

Emphasis today
-Microeconomics

Other
-Competition is good
-Invisible Hand
-Long run - Balance @ FE
-Trickle-Down effect - Help rich 1st, everyone else 2nd