3.1 - The Three Types of Economic Theories Flashcards
What is the first type of economic theory and who proposed it?
The first type of economic theory is called “Classical Economics (Free Market Economics)” and was proposed by Adam Smith.
What are the three features of Adam Smith’s “Classical Economics (Free Market Economics) (ITE)?”
These three features are:
1. It is also called the “Free Market Economy.”
2. The market is based on supply and demand with little or no government intervention.
3. Economic resources are owned by individuals who use them to generate profit.
What is the second type of economic theory and who proposed it?
The second type of economic theory is called “Interventionist Economics” and was proposed by John Meynard Keynes.
What are the three features of John Meynard Keynes’ “Interventionist Economics (TGA)?”
These three features are:
1. The government needs to intervene in the economy to ensure the most efficient and fair use of resources.
2. Governments are obligated to use the monetary policy to control the money supply and fiscal policy.
3. All of this allows nations to minimise inflation and to maximize employment.
What is the third type of economic theory and who proposed it?
The third type of economic theory is called “Monetarism” and was proposed by Milton Friedman.
What are the two features of Milton Friedman’s “Monetarism? (SW)”
These two features are:
1. Supports a free market economy with little government intervention except via monetary supply.
2. When productivity increases, the government must increase the money supply in direct proportion.
