Milton Friedmans Economic Theories Essays -- Economics

floor and BackgroundBefore the introduction of Keynesian economics and Milton Friedmans Monetarism theory, there was classical economics. These economists believed in self-adjusting food grocery mechanisms, besides with that the market needs perfect competition. Wages and prices in the market mustiness be flexible. These economists believe that supply and demand pulls would always help the deliverance reach full employment. Full employment could be achieved by the market forces and with that changes the level of employment resulting in a intractable income and aggregate output. They believed that fixed income was a result of full employment and the price level was naturalized by the supply of money in the saving. Since classical economist believed that it was the market that leads to full employment in the economy, they thinking the market could do without any(prenominal) government intervention. Government spending and taxes cause overall harm to economy because it would decrease individual spending and personal consumption. Raising taxes on private consumption would only help fund public consumption and contribute for government spending. simple economists theory of monetary constitution was thought to only affect prices and wouldnt affect truly principal(prenominal) factors such as employment. It was a major concern that if the government was to pay its spending only by increasing how much money was produced whence it would have the same out come as expansionary monetary policy. Classical economists found that their original theories were problematic when the Great Depression hit the unite States. They originally argued that the market was self-adjusting so with no government intervention they thought it would automatically correct itself. They thought tha... ...//www.econtalk.org/archives/2010/02/phelps_on_unemp.html3. Kevin D. Hoover. Phillips Curve. The Concise encyclopaedia of Economics. 2008. program library of Economics and Libe rty. Retrieved whitethorn 25, 2010 from the World Wide Web http//www.econlib.org/library/Enc/PhillipsCurve.html4. Krugman, P. (2007, February 15). Who was Milton Friedman. Retrieved May 22, 2010, from http//www.nybooks.com/articles/archives/2007/feb/15/who-was-milton-friedman/?pagination=false5. Friedman, M., & Schwartz, A. (1963). A Monetary History of the United States 1865-1960. National Bureau of Economic Research. Retrieved April 21, 2010, from GoogleBooks6. Alan S. Blinder. Keynesian Economics. The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. Retrieved May 28, 2010 from the World Wide Web http//www.econlib.org/library/Enc/KeynesianEconomics.html