Principles of Macroeconomics / Unit 10 MAC 0901 short lesson, about 20 seconds
The Neoclassical Starting Point
Captions available
The idea
The neoclassical perspective reverses unit nine's emphasis. Over long periods, potential GDP determines the size of the economy, and aggregate demand determines only the price level.
In practice
The classical tradition held this before Keynes, stressing flexible prices returning the economy to full employment.
Where people slip
Neither view claims the other is always wrong. They claim different horizons.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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