Different Schools of Economics

 

What is Keynesian School of Economics?  

According to Keynesian Economics, government plays an important role in mitigating economic recession.

This school of thought was given during the height of Great Depression 1929 – 1933.

The Keynesian explanation of how the economy functions is based on three main principles.

1.      An economy that is both mostly run by the private sector and partially regulated by the government is supported by Keynesian economics.

2.      Prices, and wages in particular, react slowly to shifts in supply and demand.

3.      Keynesians believe that because prices are somewhat rigid, changes in any aspect of spending, whether government, investment, or consumer spending, affect output. For instance, if government expenditure rises while the other spending factors stay the same, output will rise.

 

GDP is the main factor in determining the strength of economy.

Spending drives the economic growth, savings decreases it. 

What is Austrian School of Economics?

The Austrian school of economics was founded in 1871 with the publication of Carl Menger’s Principles of Economics. menger, along with william stanley jevons and leon walras, developed the marginalist revolution in economic analysis.

The Austrian School of Economics promotes an economic and social thinking that is not trapped in unrealistic, mostly mathematical models. It does not see the economy as an object of state political regulation and central, almost engineering-like control. Rather, its analysis focuses on autonomous entrepreneurial action and the free interaction of individuals in the marketplace, which eludes both the logic of differential equations, and centrally planned political control.

Saving & Production drives the economic growth.

Interest rates determine the amount of savings available for the growth of economy.

 What is Monetarism? 

The total amount of money in an economy is the chief determinant of current dollar GDP in the short run and the price level over longer periods. The amount of money in the economy is adjusted through monetary policy, one of the tools available to governments to influence the overall functioning of the economy.

According to monetarists, the best way to achieve monetary policy goals is to target the rate of increase in the money supply.

What Is Neoclassical Economics?

Neoclassical economics is a broad theory that focuses on supply and demand as the driving forces behind the production, pricing, and consumption of goods and services.