 Now that we have discussed all the 3 models in macroeconomics specifically in the framework of aggregate demand and aggregate supply. Now we are in a position to compare the outcomes or policy outcomes in all the 3 types of models. So the 3 models are traditional model, new classical model and new Keynesian model. So first of all I would like to discuss what traditional model is. Traditional model means that in which expectations are adaptive or adaptive ka kya matlab tha We have already discussed that expectations are backward looking. The past inflation rates are average value of past inflation rate. That is why I am saying that it is backward looking. So we consider that as future expectations. And if there is a prediction of a policy that the policy is changing in the future, then it will not affect your expected inflation rate. Because prediction is the future of the policy. Whereas according to adaptive expectations, your inflationary expectations are based on the actual inflation rate of the past. Compared to that, our new classical model is in which expectations are rational. But with rational expectations, the setup of the model assumes that the wages and prices are quickly adjustable. Meaning that whenever there is a change in the economy, the wages and prices are quickly adjusted accordingly. Whereas for example, if there is a shock of inflation in your economy due to which the prices increase, then the increase of the wages will be quick and there will be no delay. And third, which is the new Keynesian model, according to this model, expectations are again rational. So this has a common feature with new classical model that expectations are rational. But at the same time, the traditional model is different. But the new classical model also has a difference. The difference is that the wages and prices are sticky. So whenever there is a shock which hits the economy and wages and prices will change in the long run, but in the short run, they are not adjustable. If they do not change, then this will be the difference between the three models. Now let's analyze the policy in this model. If we compare these three models with the policy analysis, then how do they have different effects of policy? So first of all, let's see what the effects of the monetary policy will be in the traditional model. You have already read this, but here we want to compare the outcome of the three models. So first of all, I take the traditional model. So in the traditional model, we have a long run YN, which means that it is a consistent output level from the natural rate of unemployment on which our aggregate supply curve is vertical and aggregate demand curve is negatively sloped AD1 and it is initially equilibrium above point 1. Now suppose there is an expansionary demand shock because of which our aggregate demand curve shifts to the right side on AD2. Since expectations are adaptive, people's expectations will not adjust because of the shift in aggregate demand. So the new equilibrium will be point 1 prime on which the output in the short run will be more than the natural rate of output and the inflation rate will be more than the initial level. So we can say that if the aggregate demand shock, which was expansionary, is because of the monetary policy expansionary, then the positive effects can be done on the output. But if we analyze this in the new classical model, then where point 1 prime has to go up to that point, that is the working of the model, I do not repeat it. But what will happen on point 1 prime is that now expectations of inflation will adjust. People have come to know that the monetary policy has become expansionary and the inflation rate will not remain on INF1. So they revise their expectations upward. The way they revise their expectations upward, that is, they think that the inflation rate will be more than what we had thought before, then they will demand for higher wages. If they demand for higher wages, then the cost of production of firms will increase. And because of that cost of production, the aggregate supply will shift to the left side. When that shift to the left side, then the economy went to point 1 prime and went to point 2, where there is higher inflation rate at INF2, but output is at natural rate of unemployment. That is output is at a level which is consistent with natural rate of unemployment. This means that policy will be ineffective. Next, now let us see what will happen in the New Keynesian model. In the New Keynesian model, the movement up to 1 prime is the same in the traditional and new classical model. But when people revised their expectations, then expectations were revised. Now they have seen about the future, that the actual policy which we had thought was more expensive than that, then inflation will be higher in the long run. This means that they have adjusted their expectations. But the wages they are sticky, they will not be adjusted at all. When they will not be adjusted, then what does this mean? This means that the aggregate supply curve will shift to the left side, but it will not shift as much as in the New Classical model. And the equilibrium of the economy will be achieved on the right side of point 2, going to 2 prime to achieve the final equilibrium. According to this, policy will be effective, expansionary policy because the output of natural rate of unemployment will be more than the output of consistent long run. And the inflation rate will be more than before. But its effectiveness is not as much as in the traditional model, but it is more effective compared to the New Classical model because there was no effectiveness in the New Classical model. Thank you.