1. Economy is in full employment
  2. The wages and prices are very flexible
  3. There is no need of fiscal or monetary policy
  4. The Aggregate supply curve is Vertical according to classical so any rise in aggregate demand will increase prices not production
  5. There is a direct relationship between the money supply and the price level
  6. Saving-investment equality is brought about by the rate of interest mechanism
  7. Supply creates its own demand
  8. Laissez Faire or Capitalistic economy
  9. Automatic adjustment works
  10. Long run concept
  11. Saving is good  


  1. Economy may not be in full employment in short run
  2. Wage are rigid and prices are sticky (menu cost etc)
  3. Fiscal as well as monitory policy may be needed to correct the disequilibrium or improve the efficiency of economy
  4. Aggregate supply is upward sloping in the short run so a rise in aggregate demand may rise the production as well
  5. No such direct relationship exists between the money supply and price The relation is only indirect.
  6. The equality between saving and investment is brought about by the income level.
  7. Demand creates its own supply
  8. No is no adjustments
  9. No laissez Faire
  10. Short run
  11. Saving is bad