The Impact Of Neoclassical Economics On The Economy Essay

Neoclassical Economics is an attempt to restore some of the principles that Adam Smith, a pioneer for capitalist markets, advocated for in his Classical Economic theory. Smith suggested that minimal intervention should be required regarding government policy as the laws of supply and demand will be self-correcting. John Maynard Keynes was an important figure that worked to apply fiscal policy that would remedy an economic depression. Keynes’s idea of fiscal policy is the means by which government adjusts its spending levels and tax rates to monitor and influence the economy. Further, Keynes is known as the father of â€Å"Mixed Economy†, in which both the private sector (households and privately owned businesses) and public sector (government) have an active and important role in the economy. He argued that in a capitalist economy, the government would have a direct response to where in a business cycle the economy was at any particular time—Borrow to spend in a Recession or Bust, and spend only to the level of revenue collected during a period of growth or Booms. Milton Friedman, an American economist, believed strongly in a neoclassical, one-directional approach to monetary policy, where the Federal Reserve should limit monetary policy to increasing M1 (primary money supply) at a consistent rate, slightly higher than the birth rate, in order to keep economic growth at effective levels. Moreover, he believed the federal government should tax minimally in order toShow MoreRelatedNeoclassical Economics Vs. Keynesian Economics1583 Words   |  7 Pagespost -Second World War growth period, which is called Golden Age of Capitalism, has a great influence in human economic history. 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For more than three decades the Neoclassical and the Endogenous Growth theories were arguing and forwarding economic reasons on trend of economic growth through investment as a general and private investmentRead MoreSustainable Development Of Private Enterprise1703 Words   |  7 Pagesof Common Sense tries to challenge, the inherent lack of sustainability in the neoclassical paradigm. It also supports a new method for accomplishing maintainable capitalism. According to Ikerd (2005), neoclassical economic matters are the reason behind the absence of sustainability in the United States agricultural sector, and the broader American economy. 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