Macroeconomic Theories Of Macroeconomics And Classical Economics

999 Words Oct 6th, 2015 4 Pages
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics. There are two major macroeconomic theories that economists use to describe the economy. Those theories are Keynesian and Classical. Each theory has a different approach to the economic study of monetary policies, consumer behaviors, and government spending. A few distinctions separate the two theories. Classical economics is the theory that free markets will restore full employment without government intervention. They believe that the markets function best without the government getting involved. It was developed in the late 18th and early 19th century by Adam Smith. Adam Smith 's The Wealth of Nations in 1776 is usually considered to mark the beginning of classical economics. This theory dominated economic thinking from the 1770s to the Great Depression. Macroeconomics had not developed as a separate theory and classical economics was based off on microeconomic market equilibrium theory. In contrast to classical economics, Keynesian economics supports policies such as deficit spending, government control of the money supply, and an increased income tax to counter recession. Most classical economists reject these ideas. They believe that recessions naturally cure…
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