What is the key difference between the Keynsian and the Neo-Classical schools of thought? Explain using a diagram.

The Neo-Classical school of thought is built under the assumption of prices being flexible in both directions(upwards or downwards). On the other hand, Keynes suggested that wages are inflexible downwards, resulting to 'sticky prices'. This results in a flat and then vertical Aggregate Supply curve, with a small upward sloping section in between them. This is different to the normal upward sloping Neo-Classical AS curve.

Answered by George M. Economics tutor

4976 Views

See similar Economics IB tutors

Related Economics IB answers

All answers ▸

Describe a negative externality of consumption and explain a method the government can impose to reduce it. Give examples.


1. What is a floating exchange rate system and what factors influence the level of a country’s exchange rate?


Discuss the possible consequences of the imposition of an indirect tax on cigarettes for the different stakeholders in the market.


What is the definition of demand?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences