Question

Does Say’s law apply more accurately in the long run or the short run? What about Keynes’ law?

Short answer

Both have differently applied in various conditions.

Step-by-step solution

Step 1. Definition

Say’s law is a classical economic theory that says that the source of spending that generate demand to purchase current production is simply the income generated by past production and goods sale.

Keynes's theory is simply referred to as the demand side theory that’s focal point is the short-run changes in the economy. Keynes recommended a decline in taxes in increases in government expenditure to energize demand.

Step 2. Explanation

According to say’s law “supply creates its own demand”. The one who produces the goods also has to produce the purchasing power to buy goods so the goods cant be produced in excess in the short run.

So, in the long run, there is a lot of time available when supply creates its own demand. Therefore, say’s law is applied more accurately in the long run.

Step 3. 

According to Keynes law “demand creates its own supply”. To meet the demand in the economy, the short-run is the period in which demand can be adjusted. If the demand increases the producers may increase their production by running existing for longer periods. Likewise for a decrease in demand the supply can decrease proportionally.

Therefore, Keynes law is applied accurately in the long run.