Classical Economics vs Demand Side Economics vs Supply-side Economics

What is the primary focus of Classical Economics?

The economy is self-regulating and self-correcting in the long-run.

CLASSICAL: Who is known as the father of modern economics?

Adam Smith (milton friedman, herbert hoover)

SUPPLY-SIDE:

Demand Side Economics.

DEMAND SIDE: What is Aggregate Demand (AD)?

Total demand for goods and services within a specific market or economy at a given overall price level and in a given period.

DEMAND-SIDE: What leads the concept of the 'multiplier effect'?

John Maynard Keynes.

DEMAND-SIDE: What does Productive Capacity refer to?

Maximum output that an economy can sustain over a period without increasing inflation.

DEMAND-SIDE: What is the significance of Full Employment according to Keynesian economics?

It leads to a 'multiplier effect' that boosts economic output.

DEMAND-SIDE: What do Automatic stabilizers do in an economy?

They keep the economy stable and promote economic recovery.

Who was a major proponent of Supply-Side Economics?

Ronald Reagan.

SUPPLY-SIDE: What is the Laffer Curve?

A theory that shows how tax rates reduce producer output at a certain point.

DEMAND-SIDE: What is the equation for calculating GDP?

C (consumer spending) + I (investment/business spending) + G (government spending) = GDP.

CLASSICAL: Who argued that government spending can crowd out private investment?

Milton Friedman.

What major belief did Friedrich von Hayek advocate?

The economy is best left to self-regulate without government interference.

DEMAND-SIDE: Which president is known for implementing fiscal policy during the Great Depression?

Franklin D. Roosevelt.

DEMAND-SIDE: What role does consumer demand play in the macroeconomy?

It drives the macroeconomy.

DEMAND-SIDE: What is the view on depressions and recessions according to some economic theories?

They can last indefinitely.

DEMAND-SIDE: Who emphasized that de-regulation and limited government spending promote economic growth?

John Kenneth Galbraith.

DEMAND-SIDE: Fiscal Policy

Government taxing and spending can stimulate the economy + AD in economic downturns

SUPPLY-SIDE: Fiscal Policy

Government taxing and spending crowds out private investment spending and leads to debt/deficit; BAD

SUPPLY-SIDE: deregulation and limited government involvement…?

are believed to enhance economic efficiency and growth by allowing free markets to operate without interference.