28 April – IB Economics
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Review
Paragraphs vs. bullet points
Discuss Monetarists vs. Keynesians
(You’ve done Workpoints 15.1 and 15.2)
Hand out IA planning sheet
What’s the difference between the monetarists and
the Keynesians?
* Week of 8 May: Work on IAs
Syllabus Items 86
• Explain, using a diagram, that the
monetarist/new classical model of the long run
aggregate supply curve (LRAS) is vertical at the
level of potential output (full employment
output) because aggregate supply in the long run
is independent of the price level.
• Explain, using a diagram, that the Keynesian
model of the aggregate supply curve has three
sections because of “wage/price” downward
inflexibility and different levels of spare capacity
in the economy.
The New Classicals vs. the Keynesians
• What are differences between the new classical
(monetarist) LRAS and the Keynesian AS curve?
• What beliefs do each curve reflect?
• Which model do you prefer? Why?
Source: http://www.american.com/archive/2012/march/economics-a-million-mutinies-nowpart-two/FeaturedImage
Summary of Both Sides
Source: http://econfix.files.wordpress.com/2010/10/keynes-vs-monetarists.png
Who’s Right?
Source: http://1.bp.blogspot.com/Fo0kWrcWa5E/UQTh43RPYjI/AAAAAAAABwE/EPa33_ZQEGw/s640/scc-keynesians.jpg
Why the other side is wrong! 
• Keynesians failed to predict stagflation
(stagnant economy + inflation).
• Monetarists rely too much on the “magic” of
the marketplace.
Syllabus
http://ibeconomics-isd.weebly.com/