Schools of Economic Thought Activity Directions: Below you will see a bulleted list of the five Economic Schools of Thought. For each of the following questions, there will be a statement in the table cell that needs to be matched with one of the five Economic Schools of Thought. Type the Economic School of Thought that matches the statement in the blank table cell provided. Classical Monetarist Rational Expectation Keynesian Supply Side 1. Does the economy go to full employment automatically? Statement Yes, the economy Yes, in the long-run Yes, if government No. The economy can be in moves to full because people are doesn’t have too Yes, if government equilibrium way below full employment in the rational and will take many regulations and stays out of the way employment long run appropriate actions taxes School of Thought? 2. Recession cure? Statement Encourage savings Let wages fall due to through IRAs, tax cuts Continue to increase labor competition; Deficit spend or cut The only policy is an unexpected and reducing the money supply at employers will hire taxes or both change regulations on a constant rate more of the cheaper businesses labor School of Thought? 3. Inflation cause? Statement Too much regulation Too much AD or too of business, too little Free Square! Outside Shocks Too much money in the economy little AS savings, and no AS growth School of Thought? 4. Inflation cure?
Schools of Economic Thought Activity Directions: Below you will see a bulleted list of the five Economic Schools of Thought. For each of the following questions, there will be a statement in the table cell that needs to be matched with one of the five Economic Schools of Thought. Type the Economic School of Thought that matches the statement in the blank table cell provided. Classical Keynesian Monetarist Supply Side Rational Expectation 1. Does the economy go to full employment automatically? Statement Yes, the economy moves to full employment in the long run Yes, in the long-run because people are rational and will take appropriate actions Yes, if government doesn’t have too many regulations and taxes Yes, if government stays out of the way No. The economy can be in equilibrium way below full employment School of Thought? 2. Recession cure? Statement Encourage savings through IRAs, tax cuts and reducing regulations on businesses Continue to increase the money supply at a constant rate Deficit spend or cut taxes or both Let wages fall due to labor competition; employers will hire more of the cheaper labor The only policy is an unexpected change School of Thought? 3. Inflation cause? Statement Too much AD or too little AS Too much regulation of business, too little savings, and no AS growth Free Square! Outside Shocks Too much money in the economy School of Thought? 4. Inflation cure?
AP_Macroeconomics_Unit_7_Economic_Theories__ACTIVITY.docx