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Economic Theories

Economic Theories. Keynesian Economics. Decrease in Aggregate Demand (buying stuff) Individuals Companies Government Agencies The Government should increase spending (Stimulus spending, manipulate monetary policy, etc.)

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Economic Theories

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  1. Economic Theories

  2. Keynesian Economics • Decrease in Aggregate Demand (buying stuff) • Individuals • Companies • Government Agencies • The Government should increase spending (Stimulus spending, manipulate monetary policy, etc.) • Increase spending during economic dips, and pay off that spending during economic booms • Example: • Great Depression, WWII, & The New Deal

  3. Austrian Economics • Believes that mal-investments, caused by unclear market values (caused by Government interventions) make for misspending in the economy. • When those long-term investments don’t pan out, the economy busts. • Advocates little government evolvement in the Economy, because government causes confusion in the market. • Savings, not spending, should drive an economy

  4. Real Business Cycle Theory • Negative Shocks to Technology • Bad Harvests • Increase in Price of Oil • Natural Disasters • Initial Round of Negative Effects • Then there is a ripple effect that causes a negative effects throughout the economy

  5. Montarism • Money supply growth (inflation) effects economic growth, but you need the right amount • Growth to fast = risky investments and eventual depression • Growth to slow = stagnant economic growth & eventually economic downturns

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