n this causes an increase in aggregate demand, which then causes income and employment to increase. This can be seen in diagram four, and then because of the increase in income, going back to graph three, we can see that this would cause an increase in consumption. From diagram five, we can see because of the increase in employment that this would cause a decrease in real wages. The decrease in real wages would then cause involuntary unemployment to decrease. Because of the different effects that money has on the economy in these models, they arrive at different conclusions. The Classical economy seems to be in favor of no policy since everything works itself out and ends up in equilibrium since all the markets clear. The opposite is true for the Keynes model, where they are in favor of government intervention since it is not inherently self-regulating and the markets do not clear. The Keynes model needs a little help from the government, or the central bank, to achieve equilibrium, where as the Classical model, assuming all assumptions were realistic, is self-regulating and all markets clear. ...
