The Short-Run and of the Macro Economy Essay Example | Topics and Well Written Essays - 250 words

The Short-Run and of the Macro Economy - Essay Example As the study outlines Keynesian theory gives focus on immediate outcomes in the economic theory and will focus on short term policies set by the government and how they can be used to improve the economy. The Keynesian theory is built on the belief that the government will be responsible for the economy and will lay down policies that will put the economy in a favorable state. These will include policies such as monetary and fiscal policies, which are used to regulate the economy. The neoclassical theory is based on a free market hence the forces of demand and supply shape the economy. A change in quantity demanded is generally the increase or decrease in demand that is brought about by a change in price of the product which results to a change in quantity demanded. This implies that the change in the quantity demanded will be altered only because of a change in price whereas shift in demand is caused by other factors other than price. Change in quantity demand involves a movement al ong the demand curve.