What are the 4 economic theories?

By Ritesh|Updated : September 3rd, 2022

The 4 economic theories are Keynesian economics, supply-side economics, new classical economics, and monetarism. According to new-classical economists, governments must liberalise their markets, reform labour markets, privatise state-owned companies, and promote entrepreneurship (risk-taking).

4 Economic Theories and Models

Governments' responsibility in regulating the amount of money in circulation is emphasised by monetarism. Keynes argued in favour 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.

  • Scarcity, supply and demand, costs and benefits, and incentives are four fundamental economic ideas that can be used to explain a variety of human decisions.
  • Since there aren't enough resources in the world to satisfy everyone's seemingly limitless demands, this fundamental economic issue of scarcity explains why people must choose how to distribute scarce resources to achieve their goals.
  • Humans constantly choose actions based on their costs, rewards, and the incentives provided by many options since resources are limited.
  • Supply and demand are the driving forces in a market system.
  • If many individuals desire to purchase beer, the demand for beer is strong.
  • As a result, utilising wheat to create beer rather than flour allows you to sell beer for a higher price and generate more money overall.

Summary:

What are the 4 economic theories?

Keynesian economics, supply-side economics, new classical economics, and monetarism are the four primary economic theories. New-classical economists contend governments must liberalise their markets, reform labour markets, privatise state-owned businesses, and encourage entrepreneurship for economies to grow.

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