Theories of Economics

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Classical Economics stresses balance through individual interests within markets. The theory explains a society that acts as a macrocosmic reflection of the collection of individual interests. Sound Finance is a view of fiscal policy that the government budget should always be balanced except in wartime. This view was based on a combination of political and economic grounds, but primarily on political grounds. Sound finance has been abandoned by today's economy as credit is treated as a form of currency on international markets. Functional finance is a theory of economics that sought to eliminate risk and attain to total security. Functional finance emphasizes the end result of interventionist policies on the economy and is based on three major beliefs:
1. It is the role of government to stave off inflation and unemployment by controlling consumer spending through the raising and lowering of taxes.
2. The purpose of government borrowing and lending is to control interest rates, investment levels and inflation.
3. The government should print, hoard or destroy money as it sees fit to achieve these goals. (Investopedia, nd). Keynesian economics is basically a theory that excuses functional finance as a polar opposite viewpoint of a more hands off approach suggested by Adam Smith and the classical approach to market understanding. There are many trade-offs that need to be accounted for in this form of economics as it emphasizes involvement from collective sources.

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