What are the 4 Economic Theories?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The 4 economic theories are Keynesian economics, Supply-side economics, New Classical economics, and Monetarism. Governments are required to liberalise their markets, reform labour markets, privatise state-owned businesses, and encourage entrepreneurship, according to new-classical economists (risk-taking).

4 Economic Theories

Governments’ responsibility in regulating the amount of money in circulation is emphasized by Monetarism. Keynes argued in favor of reduced taxes and higher government spending. According to supply-side economics, encouraging free trade, cutting back on regulations, and reducing taxes are the best ways to promote economic growth.

  • Four fundamental economic concepts – scarcity, supply and demand, costs and benefits, and incentives—can be used to explain a wide range of human decisions.
  • This fundamental economic problem of scarcity explains why people must make decisions regarding how to allocate limited resources in order to accomplish their goals because there aren’t enough resources in the world to satisfy everyone’s seemingly insatiable demands.
  • Due to the scarcity of resources, humans constantly make decisions based on the costs, benefits, and incentives offered by various options.
  • The market system’s driving forces are supply and demand.
  • Beer is in high demand if there is a large number of people who want to buy it.
  • Therefore, using wheat instead of flour to make beer enables you to sell beer for a higher price and make more money overall.


What are the 4 Economic Theories?

Keynesian economics, New Classical economics, Supply-side economics, and Monetarism are the four primary economic theories. New-classical economists contend governments must liberalize their markets, reform labor markets, privatize state-owned businesses, and encourage entrepreneurship for economies to grow.

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