Big Ideas Flashcards
What are the main ideas of Conservative Economics?
Free Market will always produce full employment, prices do all the moving, Strong faith in the (self correcting) market mechanism, demand is subservient to supply.
What are other names for conservative econ?
Neoclassical, classical, supply side.
What does the market mechanism do in conservative econ?
Prices adjust so as to get rid of GLUTS and employ EVERYBODY (who wants to work).
Conditions necessary for Conservative econ to be right:
(1) Assumptions of Micro-Econ (perfect info, very rational, profit seeking) must be true, (2) savings and investment must be related in opposite ways, (3) No hoarding.
Liberal Econ/Keynesian Economics (main ideas)
No self correcting mechanism (therefore markets are imperfect), demand plays the main role, government must be more active, erratic nature of demand creates a lot of busts.
Macro-Economic Goals?
High/Full employment, Price Stability, Strong Growth, High GDP, Balanced Budgets/Trade.
Phillips Curve
Idea that you can’t have both high employment and low inflation. Not always seen to be true, but worked well between ‘59 and ‘69. Doesn’t seem to work well nowadays.
