Answer: In economics there are two main theories, classical economics and Keynesian economics. In our essay we will compare these two theories. Aggregate supply: represents the supply of goods and services in the market. Using our resources, technology and the efficiency of our economic institution we can derive the aggregate supply curve. Classical Economics: Before deriving the classical aggregate supply curve, we need to know two additional concepts which are the production function and the labor market. The production function is a function of capital and employment and where the economy's capital stock is constant. And the labor market is a place where workers find jobs, employers find workers willing to work, and a place where the wage rate is determined. In classical economics an assumption made by classical economists is that nominal wages and prices are completely flexible. This means that if inflation increases, nominal wages will also increase by the same amount and the real wage ratio will remain unchanged. This assumption also applies when there is a decrease in inflation. The nominal wage will decrease while leaving the real wage ratio unchanged. Economists say that, in classical economics, the economy automatically and quickly adjusts to recession. Prices and wages decline during recession, which positively impacts profits. Because more people are hired to work, which increases production and the economy recovers from the recession. The hypothesis made by economists is that, in classical economics, SA is vertical and always at the level of full employment. From this fundamentally important assumption will derive the slope of the classical AS curve and will be fundamentally responsible for the implications of fiscal and monetary policy in the classical world. Eco-Keynesian...... half of the document ...... h. According to classicists, attempting discretionary demand-side stabilization by changing G, M, or tax rates would only change the inflation rate. There is no role for fiscal and monetary stabilization in an economy via a vertical AS curve. Keynesian Economics: From the above discussions we already know that Keynesian economics is more concerned with GDP growth and unemployment. The ability of workers and their contribution to the economy matters more than the cost of goods. In the Keynesian model, fiscal and monetary stabilization is effective. From the discussions above, we can certainly say that, in classical economics, classicists tend to focus more on long-term outcomes while Keynesians are more concerned with short-term problems, which they believe need immediate attention. because they believe that short-term problems are the best way to influence long-term results.