of infrastructure, and thus increase the total expenditure in the economy as advocated by Keynes. Transfer payments (such as pensions and unemployment benefits) are not included in G as that would mean a double count. Net Exports In an open economy, the total expenditure in the economy also includes the components of net exports, which is total exports minus total imports. Income (Y)''' Income is the sum of the various components wage income, profit income, and rental income. Classical economics Classical economists relied on Say's law, which states that supply creates its own demand, which stemmed from the belief that wages, prices, and interest rates are all flexible. This comes from the classical thought that the factor payments which are made to the various factors of production during the production process would create enough income in the economy to create a demand for the products produced. This revolves around Adam Smith's invisible hand, which states that the markets would achieve equilibrium via the market forces that impact economic activity and thus there is no need for government intervention. Moreover, the classical economists believed that the economy was operating at a full employment. Classical economics has been criticized for its assumptions that the economy works at a full-employment equilibrium which is empirically false, since the economy often operates at an under-employment equilibrium mainly because of "sticky" wages, which in turn provides the foundation for the Keynesian model of aggregate expenditure. Keynesian economics Keynesian economics believes, contrary to classical thought, that wages, prices and interest rates are not flexible and hence violate Say's law, which provided the foundation for the maxim that "supply creates its own demand". Keynes believed that the economy was subject to sticky prices and thus the economy was not in a state of perpetual equilibrium and also operated at an under-employment equilibrium. Keynesian economics calls for government intervention and is called demand-side economics as it believes that aggregate demand and not aggregate supply determines the GDP because of the difference between the aggregate supply and planned expenditure in an economy. Hence Keynes believed that the government played an important role in the determination on the aggregate expenditure in an economy and thus included government expenditure in the aggregate expenditure function. Keynesian economics preaches that in times of a recession, the government must undertake increased expenditure to compensate for the insufficiency in household expenditure and private investment, so as