What are the characteristics of each of the three types of aggregate supply curves: classical, Keynesian and conventional?

Keynesian supply curve:

Assumptions:

(1) The money wage W and price P are "rigid" - they cannot be adjusted. That is, money wages do not change easily. Background: the Great Depression, labor and capital are idle. There is a large number of unemployed people and productive capacity. When output increases, the demand for labor increases, but neither the money wage nor the price level changes.

(2) Keynes studied the short-term situation: there was no time to adjust money wages and prices.

The Keynesian aggregate supply curve is a horizontal aggregate supply curve, which shows that, at a given price level, manufacturers are willing to supply any quantity of a product demanded by society. As can be seen from the figure, the aggregate supply curve AS is a horizontal line at this point. A horizontal aggregate supply curve indicates that firms are willing to supply any quantity of product demanded at the current price level.

Policy implications:

Fiscal policy is effective and monetary policy is ineffective.

Classical supply curve:

Assumptions:

The money wage is perfectly telescopic, it varies with the supply and demand for labor. When there is an excess supply of labor in the labor market, the money wage falls. Conversely, when there is an excess demand for labor in the labor market, the money wage rises. In short, under the assumptions of classical aggregate supply theory, the labor market operates without friction and always maintains full employment of labor. Since full employment is always maintained in the labor market with flexible wage adjustments, output in the economy always corresponds to what it would have been had the labor force been fully employed, i.e., potential output, regardless of changes in the price level, i.e., since the entire labor force is employed, even if the price level rises further, output cannot increase, i.e., the national income is already fully employed and cannot be increased. It cannot be increased any further. Therefore, the aggregate supply curve is a vertical line independent of the price level.

Policy implications:

Monetary policy is effective and fiscal policy is ineffective.

Classical supply curve:

Assumptions:

The money wage is perfectly telescopic, it varies with the supply and demand for labor. When there is an excess supply of labor in the labor market, the money wage falls. Conversely, when there is an excess demand for labor in the labor market, the money wage rises. In short, under the assumptions of classical aggregate supply theory, the labor market operates without friction and always maintains full employment of labor. Since full employment is always maintained in the labor market with flexible wage adjustments, output in the economy always corresponds to what it would have been had the labor force been fully employed, i.e., potential output, regardless of changes in the price level, i.e., since the entire labor force is employed, even if the price level rises further, output cannot increase, i.e., the national income is already fully employed and cannot be increased. It cannot be increased any further. Therefore, the aggregate supply curve is a vertical line independent of the price level.

Policy implications:

Monetary policy is effective and fiscal policy is ineffective.

Classical supply curve:

Normal supply curve:

The short-run reality of the aggregate supply curve is more of an upward sloping curve to the right.

Policy implications:

Monetary and fiscal policy are both effective .