9) schools of economic thoughts

Question 1

What is Keynesian economics concerned with and why?

Answer 1

• That free markets are naturally prone to an economic cycle and are volatile
• they aren’t always self correcting and therefore require some level of government intervention
• AD is dependent on business and consumer confidence

due to the 1929 depression

Question 2

What is austrian economics concerned with?

Answer 2

• markets need to be set free because they are capable of sorting themselves out
• believes intervention will make things worse
• saving for interest which will drive investment

Question 3

What do Neo-classic economists think?

Answer 3

• Essentially linking economic behaviour with a consumers preference to maximise their utility, and that goods and services often have a value that goes above their price
• everyone in theory makes decisions based off of fully informed decisions with perfect knowledge
• As opposed to Keynesian economics, this school of economics states that savings determine investment and is primarily concerned with equilibrium in the market and growth at full employment rather than the underemployment of resources.
• they believe competition drives an efficient allocation of resources in an economy