Three Schools of Economics

Three schools of economy ( Classical, Keynesian, Monetary)

Points of Classical school

•  Investment (Injection)
• AS determines output
• Market works by it self (No government intervention)
• Savings increase with interest rate
• AS=AD at full employment equilibrium
• In the LR the economy will balance at full employment (economy close to or at full employment)
• Believe in the trickle down effect ( this is were you help the rich first and everyone else latter)
• Prices and wages are flexible downward

Points of Keynesian school

• Competition is flawed (AD is key not AS)
• Demand creates its own supply
• Savers and investors save for different reasons
• Saving are inverse to interest rate
• Leaks cost constant recessions and savings cause recessions
• Ratchet effects and sticky wages block state law
• Price/wages are inflexible downward
• No mechanism capable of guaranteeing full employment
• The economy is not close to or at full employment
• Government intervention (expansionary & contractionary policies (Fiscal policy) 

Points of Monetary school

• Fine tuning is needed, congress can't time the policy options (voters wont allow it)
• Contractionary option
• Easy and tight money 
• Change the required reserves if needed
• Buy & sell bonds in open market
• Change in interest rate for the discount rate & federal fund rate