Abstract This paper discusses and analyzes both the New Keynesian theory of economics and the Neo-Classical concept of economics, explaining that both approaches have some benefits and some flaws. The paper concludes that the New Keynesian theory is geared to short term solutions and does not appear to be able to handle much variation in events while the Neo-Classical concept borrows from the Keynes theory and the Classical theory and seems more prepared to handle long term issues.
From the Paper "In the 1940s and 1950s Keynesian analysis was developed to provide good policy guidelines. However, in the 1970s, the economy went into a period of stagflation and the analysis developed in the earlier decades did not work. Younger economists declared that Keynesian economics was dead. Hi-tech forms of classical economics were resurrected as a framework to eliminate government responsibility for maintaining full employment."
