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Economic Models & US Economic Performance

ECONOMIC MODELS AND EXPLAINING AMERICAN ECONOMIC PERFORMANCE 19811992

This research examines five models for explaining economic activity in a marketbased economy, and assesses American economic activity from 1981 to 1992 in the context of these models. The five models are classical, neo classical, monetarist, neo Keynesian, and supply side.

Description and Explanation of the Models

Ray Rees (1984, p. 124) differentiated between classical economics, and the classical school. In the context of this differentiation, he stated, on the one hand, that the classical period of economics began with Adam Smith's Wealth of Nations in 1776, and ended with John Stuart Mill's Principles of Political Economy in 1848, while on the other hand including Alfred Marshall and Arthur Pigou in the classical school.

Adam Smith was a contemporary and a friend of David Hume, and he traveled to France several times to meet with the leading thinkers of Physiocracy. Thus, while Adam Smith is considered to be the founder of classical economic theory, he, nevertheless, incorporated several important concepts from thinking not generally ascribed to the classical school. Hume's contention that the rate of interest depended on the rate of business profits formed the basis for Smith's interest rate theory, and Hume's quantity of money theory remains a part of economic theory. While neither David Hume nor the Physiocrat thinkers are included in the classification of classical economists, the fuzzy boundary between classical economic theory and that thinking

which preceded it does not permit their complete exclusion from the classical school.

Two of the most influential of the firstgeneration market economists were Adam Smith and David Ricardo. In the formulation of economic theory, Adam Smith was principally concerned with the factors which led to increased wealth in an economy. He contended that the cost of labor provided the basis for the ...

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Economic Models & US Economic Performance. (1969, December 31). In LotsofEssays.com. Retrieved 11:14, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1683907.html