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Economic macroeconomic schools of thought in the US today
Please read essay attached and answer the two questions below in 1000 words with 2 bibliographical resources.
Cambridge economists: The art and science of economics at Cambridge From the print edition | Christmas Specials Dec 24th 2016,
What are the major components of economic macroeconomic schools of thought in the US today? (Hint: Chicago School, Keynesian, Neo Keynesian, Neo Classical, Supply Side, Trickle Down, Libertarian, Austrian School, Other?)
How do they differ from or compare to the Cambridge School?
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Major components of economic macroeconomic schools of thought in the US today
Chicago School
The Chicago school of macroeconomics is a sub-branch of the Neo-classical school of economic thought albeit with a few divergent views. The school of thought developed from intense discussions by Professors in the University of Chicago, whose ideas were mainly price based. The main identifying component of the Chicago style of macroeconomics is the preference for the monetarist theory as opposed to the Keynesian approach.
However, as with all other schools, the development of economic theory in the 20th century brought a mix of ideas from both the saltwater and freshwater schools (Ebeling, 2006). A case example for the Chicago school of macroeconomic thought is the adoption of concepts of rational expectations, sticky wages, and imperfect competition. Notable mentions from the Chicago school include Eugene Fama, Milton Friedman, and Lars Peter Hansen.
Keynesian economics
The Keynesian school of macroeconomic thought bases its theories on the works of John Maynard Keynes. The main proposition by Keynesian economists is the need for government intervention to manage the business cycle. The Keynesian school of thought is a major proponent of the aggregate demand approach of macroeconomic evaluation. The concepts of sticky wages and imperfect competition represent rigidities in the macroeconomic system for which the Keynesian economists attribute the failure to streamline the system of supply and demand through fiscal and monetary policy (Evans & Makepeace, 1979, pp. 40 – 43).
Neo Keynesian
The neo Keynesian school of macroeconomics is a post-war attempt at synthesizing the ideologies of John M. Keynes and the neo classical approach to macroeconomic theory. The fusion of market control, supply and demand, and rational choice theory came together to provide the foundations of the neo-Keynesian economics. The neo Keynesian approach began taking shape after monetarist economists cast doubts on the Keynesian theories.
The neo Keynesian approach then resulted from finding a middle ground between the Keynesian and Monetarist approaches to the analysis of the macroeconomic environment. The result of these studies was the development of the neo classical synthesis, which gave rise to the IS-LM model and the Philips curve (Arestis, 1992; Lavoie, 2014).
Neo-Classical
The neo classical economic school of thought is a collection of economists, whose ideas revolve around the exchange of goods through the assessment of outputs, and the distribution of factors through market supply and demand. The neoclassical model makes three key assumptions: rational preferences among consumers, maximization of utility and profits for consumers and producers respectively, and independent activities of consumers based on perfect information.
Varying scholars contest on a number of issues surrounding neo classical school of economics. First is the dominance of either marginalism or utility, second is whether the approach is a radical change from classical economics or simply a continuing development of ideas, and third, the numerous ideologies and differences between views and approaches aggregated into the classical approach (Weintraub, 1993; Hansen & Ohanian, 2016).
Economic macroeconomic schools of thought in the US today
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