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Neoclassicals believe wages & prices adjust quickly in response to changes in demand. Prices are flexible. Keynesians encourage stimulating the economy during recessionary times and slowing the economy down during booms, using a combination of fiscal and monetary policy. Keynesian focuses on the short run whereas neoclassical focuses on the long run.There are economists who consider themselves exclusively Keynesian or exclusively neoclassical, the majority believe that both perspectives have something to offer.

Keynesian thinking makes sense over periods of time too short for wages and prices to adjust fully to demand or supply shocks. Neoclassical thinking makes sense over longer periods of time. Keynesian thinking is usually applied to understanding business cycles and neoclassical thinking to economic growth. Keynesians also believe in an indirect link between the money supply and real GDP. They believe that expansionary monetary policy increases the supply of loanable funds available through the banking system, causing interest rates to fall.

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Monetary policy refers to the actions by a nation's central bank to control the money and achieve economic growth. It manages interest rates to meet supply to meet macroeconomics, for example controlling inflation, consumption growth, and liquidity. The Keynesian model aggregate demand as a business cycles and a degree of wage and price severity. This explains why the economy suffers recessions and unemployment. Keynesian economics might overlook long-term causes of economic growth ot the natural rate of unemployment that exists when the economy is producing at potential GDP.

Keynesian economics views inflation as a price that might be paid for lower unemployment and often suffers and suggests monetary policies like tax cuts and increased government spending to increase the amount of money that circulates in the economy. The neoclassical model stresses the importance of aggregate supply and highlights the underlying factors of output and employment in markets, but cannot explain cyclical unemployment or deep and long-lasting recessions.