What is the main difference between Keynesian and neoclassical approaches in the utility of government policy for dealing with short-term fluctuations in the economy?

Question.  What is the main difference between Keynesian and neoclassical approaches in the utility of government policy for dealing with short-term fluctuations in the economy?

Answer: 

Keynesian's school believes that economic cycles are corrected by active fiscal and monetary policy only. So a negative (positive) short-run economic shock is corrected by increasing (decreasing) government spending, which increases (decreases) aggregate demand.

The neoclassical school believes that economic cycles cannot be corrected by active fiscal and monetary policy or by any intervention, since the economy self-adjusts. So, if there is a negative (positive) short-run economic shock, aggregate supply will increase (decrease), restoring equilibrium. So government spending will be an ineffective policy tool.

Kinsey's economy focuses on side-by-side solutions to demand and periods of recession. Government intervention in economic processes is an important part of Keynesian arsenal in the fight against unemployment, underemployment and low economic demand. Kinsey vs. Classical Models and 
Policy . Classic Economy emphasizes that free markets lead to effective and self-regulated results.  In macroeconomics, the classical economy assumes that the overall supply curve is inflexible in the long run.  The classical model is the importance of reducing public intervention and seeking to keep the market free of potential obstacles to efficient operation. 

Neoclassical economic theory is not dependent on government spending. It intends that public spending can slow economic growth due to increases in the public sector and a decline in the private sector. Kinsey's economic theory relies on government spending to stimulate economic growth during the slow recession.

Government policy to support the people's government

The model, as Olivier Blanchard pointed out, had important features that undermined Keynes' vision: expectations were no part, and the price and wage adjustments were completely absent. Keynes believes there is no flexibility in prices and wages for a short time, which also means the industry is not constantly changing its prices.

On the other hand, as John Hicks pointed out, his model was a flexible pricing model and an ideal competitive model, with flexible prices, while Keynes' cash payment level was set externally. Full employment model.

In addition, while Keynes took a short period of time into view, the IS-LM model was a "very short period"" in which Hicks wanted to consider the reflection of the minute moment instead of a period of many events. 

In recent decades, neoclassical economics has been the dominant school of economics, along with the theory of their intellectual choices. Much effort has been made to mix the Kinsey macroeconomics and neoclassical economics that came out of this neoclassical synthesis.

But neoclassical are often attacked for not taking into account human behavior and forgetting that real people are different from economic human beings, created by this theory. Several critics throughout their positions do not reflect the situations of truth, because people are exposed to other additional events. Moreover, for many authors, their very mathematical assumptions are considered failures when they are unrealistic.  However, the neoclassical and Kinsey economies are still competing, especially after the 2008/2009 recession. 

On the other hand, there are many who do not take up the idea of Kinsey politics.


It is then clear that neoclassical and Kinsey theories are still being discussed at universities around the world, in the past few years, and the consequences of this collapse, there will be other considerations in relation to these theories.