Keynesian economics | Aggregate demand and aggregate supply | Macroeconomics | Khan Academy

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Contrasting Keynesian and Classical Thinking
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Macroeconomics on Khan Academy: Topics covered in a traditional college level introductory macroeconomics course
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[@RSKEDITS]

I just realized(from online classes) that,colleges who we pay a lot of money , has worse quality than khan academy, who does it for free even 8 years ego.

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College have this problem of always following old models of teaching, meanwhile the internet is using the best ways of teaching. the teacher doesn't have to stress himself he have all the time to make a good video, the students can rewatch any point they didn't understand and so on. the only reason college is still relevant nowadays is because getting a job still requires some sort of degree or certificate.

[@matthewexline6589]

Well I hope you're really young for just realizing this.

[@RSKEDITS]

@@matthewexline6589 yep I'm 19

[@matthewexline6589]

@@RSKEDITS Go for computer programming. If you're good at it and can show an employer a git repo filled with good stuff, you can get your first job earning well over $60K/year if you've really got the talent. Don't bother with a school unless you've got the money. Employers looking for excellent programmers and who already have excellent programmers hired and doing interviews will give way more shits about what you know than about any diploma or degree. There are more free resources out on the web than you'll ever have time to look at and trust me, they're all you'll need. Good luck with it.

[@RSKEDITS]

@@matthewexline6589 thanks man, u got good insights on the subject, are u a programmer?

[@juanelrojo1]

Khansian Economics!

[@vishnuvardhan_me1892]

Liking your comment after 7 years. How's life?

[@subhadippal7889]

😂👌

[@muhammadk2637]

বোকাচোদা।

[@omarfaruk5417]

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[@muhammadk2637]

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[@GigiGraffiti]

I want to thank you so so so much! You’ve really helped me during all of this COVID-19 mambo jumbo, and I learned about 6 weeks worth of lectures in just a few of your videos, I will honestly keep coming back because I have learned so much in depth about Econ. Thank you!!!!

[@rachelshelley3234]

Excellent video. I have a weaker grasp on economics than I'd like to admit. I've been doing some self-teaching, and your videos have been an excellent way to bolster that. Thank you for putting this out there!!

[@HunterParkermusic]

I'm gonna go ahead and call that last bit of the video "Khan-sian" economics.

[@jyoung5256]

Hunter Parker haha yes

[@Mr.Bombastic__log10]

Children's÷Keyne-sian Legend÷ khan-sian..🤣

[@DanTheStripe]

Person C: I think the economy is gonna crash! Person C: **crashes the economy** Person C: *surprised pikachu face*

[@ramina6568]

@Karl Marx Lol

[@vladimirlenin3562]

Lmao

[@jellytabby2135]

lmaooooo this is wayyy funnier than it should be

[@Caephas73]

Dude your videos awesome. I first started watching your videos on algebra when I first started attending community college. Now that I am finally in a state university I still watch your videos from time to time just to get my bearings. Thanks Khan, YOU MY MOY BLUE!!!

[@Urbane-Legends]

A very concise explanation. Thanks for doing it man . Came with different conclusions than you but i guess thats whats its all about! Thanks for putting it out

[@shahzebafroze4093]

I am in college and your your videos have always been very helpful I owe u a lot

[@arjun01235]

if you interested to learn in detail with example about "Real Balance Effect" than follow this link arjnpanthi.blogspot.com/search/label/Real%20balance%20effect

[@shaaziasoomar]

Shahzeb Afroze agree

[@mmaking8664]

How the hell does sal know EVERYTHING? How does he know science and commerce and history?

[@ivandate9972]

+MMA king i think mostly he just read a text made by his expert employee .....

[@TheDark-Knut]

+MMA king Obviously he uses sources for references. For some complex subjects even hires experts.

[@ahmetsahinterbas1757]

Sal's talent isn't necessarily having the knowledge but delivering it in such a way so as to excite and nurture his viewers. He is able to decrypt otherwise complex information into a manner that is comprehensible

[@mmaking8664]

He sure does know what he is teaching. There is no two ways about that.

[@WayneStakem]

Wikipedia!

[@maksms]

I admire all your videos and the valuable content it gives. I have been learning a lot through them, great work.

[@JesseMaurais]

I'm glad there's at least one video on KZbin giving it a fair explanation.

[@linhtrangpham1995]

ReALLY USEFUL AND EASY TO UNDERSTAND, THANK U!

[@snowfreak1209]

you have no idea how much you have helped me. Thanks Salman!

[@akamatsuken]

I will never be able to stress enough how well made I think this video was

[@ea2631]

Loved this video, learned a lot, subbing khan, thanks for the help

[@whartanto2]

Awesome Awesome explanation of Keynesian economics - I tried to read the General Theories, but all the equations confused the hell out of me. Thank you!

[@kojosmith1210]

wow something that looked so complicated was made extremely easy to understand through watching this video thank you

[@AtticusOfAmber]

Indeed, it's worth reading the whole quote, from chapter 3 of his "Tract on Monetary Reform" (1923) Ch. 3: "The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."

[@nannybannany]

I have been watching your videos for a while now, and I only yesterday saw your TED Talk. Keep up the great work!! :D

[@HarryProudlove]

Great video, clear and concise. thank you very much.

[@dinadeira]

This was a very informative and understandable video, thank you!

[@patrickwalsh5153]

Thanks, this helped me to understand this subject better than the last hour of studying I've done.

[@PunmasterSTP]

I know it's been almost a decade, but I just came across your comment and was curious. How did the rest of your class go, and how have you been doing since then?

[@patrickwalsh5153]

I've been doing well. I graduated from college, went to nursing school and have been working as a RN.@@PunmasterSTP

[@bhavyaagrawal7895]

I really believe Sal is one of those guys with 0 haters. How could someone not love him and his work?

[@lukerobson5102]

Fantastic video, well explained, please keep up the amazing work

[@gconomics3766]

A great supplementary watch for my students.

[@geekonomist]

I love how this video purports to demonstrate that there are no absolutes, but we should believe one side or the other once in a while...

[@darkhfyre233]

My economics class sucks. Thanks for this great lesson 👍

[@RUCER3Al]

I was struggling with the subject, since the book is difficult to understand. Luckily this video seems understandable.

[@polka678]

all makes sense, thanks!

[@LaureanoLuna]

Yes, the Keynesian aggregate supply curve tends to verticality as the actual output approaches the potential. So, it is a realistic model.

[@jrodriguezquiros]

Sal please explain why the independent variable (price level, P) is depicted on the y axis, whereas the dependent variable (GDP) is depicted on the x axis. Thanks.

[@dontlogin79]

Best concise video on this topic

[@cheydinal5401]

Your combined model is exactly what I've been thinking since a year ago, only I couldn't put it into such a neat graph

[@mysecretadd]

"When people have bad dreams, the stock market crashes." Salman Khan

[@dwaipayan13]

Very helpful. Thanks

[@jeffb2958]

You helped me understand about half of our inflation problems with 10 seconds of video

[@john_smith_john]

you thought there was an inflation problem 6 years ago? hahahahahaha

[@robbiedozier2840]

@@john_smith_john the problem has been lack of inflation

[@noninterventionistchad4326]

@@robbiedozier2840 horrible take. there’s no way you just said that lmao

[@robbiedozier2840]

@@noninterventionistchad4326 western countries have been struggling to hit inflation targets for decades. We’re only just now having problems with inflation in the US and it’s clearly supply-side inflation

[@ol2670]

@@noninterventionistchad4326 inflation is inherently a bad thing, the target rate of inflation is 2% annually to induce constant consumption and investment vs just hoarding capital if money retained its same value

[@ash4245]

great video make more of these

[@beverlybeepath2807]

Taught me more than the text

[@rayindaputri1656]

thank you sal for making khan academy

[@electionswithmason9920]

I'm in 9th grade and I don't understand the charts but I get what you're saying about how Keynes thinks we need to stimulate demand as well.

[@AB-zc5ff]

We are in a Keynesian Economic "cycle" right now in fact

[@parthibabandyopadhyay171]

So What is actually the time span in case of Keynesian Model? Short run or very short run? In Dornbusch-Fischer-Startz, it is mentioned that the horizontal AS curve is the case of Short run.

[@captainamericaxxx3874]

Good video. Thank you.

[@Amphibianman94]

Could you make a video for the Austrian School of economic thought as well?

[@alisapuskala1437]

thank you, you're the best

[@nthperson]

The great blindspot in the analysis of market economies by Keynes is the central importance of land markets and the fact that the supply of land is inelastic. In the real world, the price mechanism does not clear the market for land. Quite naturally, owners of land will withhold land from use or sale in anticipation of ever-rising land prices. The only way to remove the potential for owners to profit from hoarding land or "investing" in land for purely speculative gain is to impose an annual tax on land equal to its potential rental value. Only then would land markets respond as does labor and capital goods.

[@arshadfarook27]

Can u add monetarist approaches Al's?

[@wildCATcanACT]

The Keynesian model here is generally based on a stimulated economy (of the short run) and when dealing with fiscal policy of government, is built on monetizing debt. So when you have the Keynesian model, it's based on a system of monetized debt through a government that tries pushing up the pendulum. The thing is, pushing the pendulum will result in a back swing.

[@AmanKumar07_]

The Keynesian concept of consumption function states that there is a common tendency for people to spend more on consumption when income increases, but not to the same extent as the rise in income because a part of the income is also saved.

[@myusernameissoobnoxiouslyl1466]

Thank you Keynes for creating at least 90% of America's economic problems

[@NonoLosi-lu6vx]

Excellent teaching skills

[@logicalconceptofficial]

There is no "sometimes" about the free market finding the best equilibrium. There's only a timeframe and most of the time people are too impatient (want instant gratification) to let it run its course in the best fashion possible and end up picking the scab prolonging how long it takes to heal! The problem with increasing aggregate demand especially through government spending of any kind is that you aren't going to get the proper productivity out of it you're going to boost productivity in areas of the economy that are inefficient or less useful that if you let the market determine which industries/products are in demand!

[@christianfarrar5683]

Why don't I seem to have the capability to understand economics?

[@algebraizt]

Because you are a complete and utter failure at life and should really just give up now and accept your sad, miserable existance of incompetence. OR You're good at other subjects and should pursue them as a career choice and stop stressing yourself out at getting a few Bs or Cs in your weak subjects.

[@subhramchhetri3868]

@martin lee funny to hear that from a person who spells the word "existence" incorrectly.. Pathetic perception on life!

[@SuccessMMA]

This is a really good explanation.

[@Arcustxt]

Because Economy is a religion, and just as one it should be taught... It's religious tenets get crashed every 20-49 years with changed consumer priorities, then comes a prophet to show "the new ways", which gets recited moronically 'till the end. Meanwhile common folks get manipulated to no extends, with flashy adverts and we get one step closer to mass extinction. Hey... but look on the bright side, those leather seats are actually comfy (and I like my shiny new car)

[@mn2609AA]

Well, sorry that organizing the economic interactions of millions and billions of people changes with every-changing stati of environments(e.g. globalisation) and that there always will be disagreements on how to do it.

[@fl4everhome]

After watching about 50 of your videos, I thoroughly believe you could beat watson on Jeopardy! Great videos :)

[@emmahollard485]

for the last diagram you drew, the y-axis is actually Price LEVEL, you will get points off for this on the IB Exam

[@rayjamesv5641]

Thank you so much sir.💕🥰🤩

[@chewie1355]

May 2020 and now the Keynesian economic seems more real

[@kubaniski]

Do Austrian Economics next!!

[@josephc28]

@youngthinker1 Good points. The Fed also kept interest rates artificially low for several years. This encouraged more borrowing.

[@albertuserwinsusanto924]

Awesome 👍

[@user-zy2jp6zj9r]

Super Video ! Like from Ukraine !!

[@chinhwenittamisoniac4711]

well from the last model you just have given i suppose that was under the long-run circumstances, thus the price will shift greatly without obvious output increase, but what makes confused is that why people, in the long run, ignore the negative future, choose to cut their output instead of reduce the price to gain as much cash as possible, considering with lower productive capacity, the cost should fall as well? It will be great if i can hear an answer here.

[@pebre79]

great intro

[@KTheStruggler]

I always pronounced it key knee zian, so I was a little off haha

[@senoner90]

@baydood510 Austria is a great nation! So many scientists, thinkers, philosophers, musicians in that tiny country, great respect!!

[@Sri6573703]

You the man!

[@nthperson]

There is a fundamental flaw in the explanation of business cycles put forward by Keynes. He accepted the neo-classical discard of the classical treatment of nature (i.e., land) as a distinct factor of production. The apparent reason is that Keynes could not think of land beyond the treatment provided by Ricardo relating to agricultural land. Locations in cities are valued by the square foot, not by the acre where land is more distant to centers of population. Moreover, he failed to see that a high annual tax imposed on the rent of land would provide important incentives for owners of land to bring the land held to its highest, best use or sell to someone who would. Raising revenue from the taxation of land rent would have an important stabilizing impact on the production of goods and services. Taxes on wages, capital goods and commerce have the opposite effect; they impose significant deadweight losses on economic output.

[@muhammadanassiddiqui8228]

Sir Please try to put Urdu subtitle also because my english is not good to understand your lecture... Big request 👍👍❤❤❤

[@ronpaulrevered]

Now do a video on the Austrian critique of classical and Keynesian aggregate analysis.

[@nicknolte8671]

Nobody cares about those crooks and cranks. Just like no one cares about Ron Paul.

[@ronpaulrevered]

@@nicknolte8671 They should, because Ron Paul and the Austrians are correct in their critiques. What sort of fake reality are you living in? Must not be any inflation from an increase in the money supply without an increase in the production of goods and services where you live; but there probably is.

[@charlesbrady3471]

This explanation of the "General Theory..." is an example of using a set of facts, which although individually are with a few exceptions accurate, totally distorts the actual meaning of Keynes analysis of the economy. Classical economic analysis assumes that the economy will operate at full capacity, and can not explain the phenomena of involuntary unemployment. The General Theory explains that it occurs as a function of aggregate savings and investment.

[@MyWff]

Hi, could you do a video about milton friedman's fooling model and business cycles? Thanks

[@timeisrunningoutforthebeast]

Thanks

[@Countcho]

you should do austrian economics

[@eyeorigins77]

so why do the classical believe that the aggregate supply is vertical?

[@jaykay415]

I really need to start at a more basic level.

[@sabriath]

The problem people are taught about supply and demand is in 2D space.....but it's a 3D and sometimes a 4D construction. As supply increases, price falls, but as demand increases, price rise....so you have 2 axis of supply and demand, with a third axis of price. However, there is also the account of the vector of future position based on velocity of the production.....meaning, every point in the grid points to another position in the grid to determine the flow of the price over time. For example, if the demand for televisions are 100, and you supply is 90, then you have effectively reduced the future demand down to 10 because you've provided the supply....then you add in the delta of replacements, population growth and other factors to build that back up. The goal of a company is not to match supply and demand, but to maximize the return profit of the cyclical velocity in the fourth dimension.....otherwise, you go bankrupt like Blockbuster (supply with zero demand). As for the consumer, they will have demands for various things at various levels regardless....and they may come as patterns (ice cream has higher demand in summer, for example), but ultimately you use that to determine the velocity vectors. Pricing itself isn't an exact value, as each market has different values to determine, it's more of a multiplication factor against the national mode of purchasability. GDP doesn't come into play until AFTER the production has been consumed....which means it isn't even a qualifier for the graph to determine anything. GDP is just a measure of the nation to meet demand, that's all. As for the depression about people "not wanting to work, but demand was high and prices couldn't rise"....this was because the national mode was reduced, and multiplying a high number against a low number still results in a low. For example, let's say that a normal factory supplying 100 cans against a market demanding 100 cans cyclically, the mode of the nation is at $10, and the multiplying factor at that level is 0.1.....so the can's price is $1. Now imagine the factory no longer able to supply cans, and hungry people's demand now goes to 200, the multiplying factor skyrockets to 5, so you would think that the price of the can is $50....but no.....the national mode, because people were out of work and had no money, was at $0.10.....which put the price at $0.50 for the can. The mode of the economy was extremely low during the depression, which made prices fall even though they were in high demand, because people still couldn't afford it (because having $10 in disposable funds easily buys 10 cans at $1 each.....but having only $0.10 can't even buy you 1 can at $0.50).

[@qqhey6286]

Are classical and keyesian curve in short run same?

[@sr_2746]

Yeah we all have exam tomorrow! All the best guys

[@PrinceMyshkin22]

There was a progressive tax rate that oscillated between 70%-90% on the ultra wealthy, and around 20%-30% on the Middle Class. The beauty was since the government had a steady stream of income, it was able to use those funds to invest in infrastructural projects, GSE's like Fannie and Freddie(which because of those two institutions mortgages were lent at a sustainable rate instead of the 2000's with the ARM and Sub-Prime loans), NASA, Social Security, Medicare/Medicaid, Food Stamps, etc.

[@mdarmstrong72]

Both or neither. It depends on what ASSUMPTIONS you make about individuals and how they make decisions. That is why there is a debate about Smith's view, Keynes' view and supply side view and which is better.

[@LiveIt-YouRLife]

Khan Academy you are amazing, I wish the world's educational system adopt your way of teaching.! A sophisticated and well planned, comprehensive educational forum. If I had no educational platform to study, I would have been studying Khan academy the rest of my life and it would have sufficed.

[@Hereward1044]

Is this "in between" model something of the "laffer curve" in Reaganomics?

[@smoothtalkwith2014]

It’s hard to get the government to stop spending, unless it’s social spending, aka the exact sort of spending described in the analogy. What we can’t get them to stop is military, surveillance, or foreign influence spending.

[@ilredeldeserto]

is the sticky prices assumption so necessary ? I think it's more a neokeynesian that a postkeynesian assumption...

[@kroovyandcal]

I don't believe I understood in college the reasons WHY the LRAS curve in vertical, so I just figured that I'd have to merely accept that this model is correct, though seemingly preposterous. Aggregate quantity is always the same no matter what the price of the total?

[@ThomasJames69420]

Classical: long run, all water will reach its natural level Keynes: but short term there are waves! Short term thinking in both life and economics is dangerous and counterproductive

[@GeoLi2]

nice

[@Fangorn1]

Tell that to the people that will drown in the short term

[@SagarKumar-dc8ll]

keynesian theory of employment ex ante saving and ex post saving always equal? True or false

[@Riceater88]

I FINALLY understand what that Ron Paul guy has been talking about! lol

[@samanthabloodsaw4450]

CIRUMMATES IS DEMAND THANK YOU I ASK That wussp with that question every year child development told me finally communtiy based is value

[@marcjones744]

What is keynes view on govt investment in education... it should produce more supply because more people can provide more goods and services on the supply side; but it also should produce more demand as more people should have more income to spend on the demand side

[@livefreeordieaction]

A few others things to think about... 1.) Where does the Government get the money from to "invest"? (it either has to print it or take it from the economy)... Government has nothing that it first doesn't take) 2.) How does it know which companies, industries, etc are the best to invest in? 3.) Could the idea that the Government will "bail out" or interfere cause a moral hazard? 4.) Does Government policy (economic, monetary, etc) cause the bust that requires a boom?

[@VickiBee]

My grandma lived through the great Depression. She talked about it in her memoirs.

[@economicswithsajid]

Nice

[@McMises]

keynes is laughing, "they actually buy into this"

[@baseddepartment8338]

LMAO

[@socctty]

Keynes said "In the long run, we are all dead" somewhat tongue in cheek. He wasn't being pessimistic. He was shining a light on what he thought was an over-emphasis of the idea that the economy would fix itself and stabilize in the long run. So his point was that yes, things would EVENTUALLY get better, but in the meantime there'd be enormous unnecessary suffering.

[@viritrilbiaslayerofargus.6691]

Do one for the Austrian House of Economics

[@fleetcenturion]

Moving the AD to the right (i.e. inflating) only changes the scale of the model. It does nothing to change the reality. It will, however, create false signals on a more micro level, causing more chaos within the system when individuals slowly discover that their medium of exchange is worth less. This is why the depression of 1920 was over in about a year, while the one beginning in 1929 did not fully recover until after WW2.

[@spress15]

@youngthinker1 - No, I wasn't trolling. Just attempting to cast doubt on principle of total "laissez faire" in economics by a parallel application to another sphere of human well-being. I am glad that we choose to use government to control spread of bodily diseases. It would be nice if we could control spread of economic ills. That's a big "IF", because applied economics are thrown off course by human emotional reactions and by unforeseeable circumstances like war and natual disasters.

[@wickedfifth]

5:44. Prices of what are sticky?

[@gemenegasa6160]

keynes concept of AD &AS is not clear for me....if u can, please help me