The document discusses classical and Keynesian theories of employment. The classical theory assumes full employment can always be achieved through flexible wages and prices in a self-regulating economy. However, the Great Depression challenged this view. John Maynard Keynes then developed an alternative theory that employment is determined by aggregate demand, and that wages and prices are slow to adjust downward. Keynes argued governments should intervene through fiscal policy to boost demand and employment when the economy is not at full employment.