Monetary Policy

Fiscal Policy on GDP from Keynesian view
Classical economic theory (Adam Smith, etc.) assumed that a "free-market" economy is a "self-regulating" system that continually tends towards full-employment equilibrium, with optimum economic benefits for everyone. Therefore, the best government economic policy is to "get out of the way" and give maximum freedom to individual enterprise. The term 'Classical' refers to work done by a group of economists in the 18th and 19th centuries. Much of this work was developing theories about the way markets and market economies work. Much of this work has subsequently been updated by modern economists and they are generally termed neo-classical economists, the word neo meaning 'new'. Classical economic believed that the government should not intervene to try to correct this as it would only make things worse and so the only way to encourage growth was to allow free trade and free markets.
A key element of the "Keynesian revolution" was its demonstrati...