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Outline the key contributions to economic thought by any three of the following economists: (i) Adam Smith (ii) Milton Friedman (iii) Karl Marx (iv) Thomas Robert Malthus (v) John Maynard Keynes. - Leaving Cert Economics - Question c - 2017
Question c
Outline the key contributions to economic thought by any three of the following economists: (i) Adam Smith (ii) Milton Friedman (iii) Karl Marx (iv) Thomas Robert Ma... show full transcript
Worked Solution & Example Answer:Outline the key contributions to economic thought by any three of the following economists: (i) Adam Smith (ii) Milton Friedman (iii) Karl Marx (iv) Thomas Robert Malthus (v) John Maynard Keynes. - Leaving Cert Economics - Question c - 2017
Step 1
Adam Smith
Answer
Adam Smith is often regarded as the father of economics. His key contributions include:
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The Pursuit of Self-Interest: Smith argued that individuals pursuing their own self-interests indirectly contributes to the overall good of society, a principle that supports the foundation of free market economies.
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Division of Labour: He highlighted that productivity increases when workers specialize in specific tasks, as shown in his famous example of the pin factory.
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Invisible Hand: This concept suggests that self-regulating markets drive economic progress, allowing competition to foster innovation and improvement.
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Laissez-Faire Principles: Smith advocated for minimal government intervention in markets, indicating that free competition leads to better outcomes for society.
Step 2
Milton Friedman
Answer
Milton Friedman made notable contributions to economic thought, including:
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Monetary Policy: He argued that controlling the money supply is crucial to managing the economy and controlling inflation.
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Laissez-Faire Principles: Friedman supported limited government intervention, advocating for a free market that encourages efficiency and innovation.
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Supply Side Policies: He endorsed policies that improve market efficiency and reduce government control over economic activities.
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National Income Identity: He provided insights into the relationship between consumption, income, and expenditure guided by the equation: C = I + G + X - M.
Step 3
John Maynard Keynes
Answer
John Maynard Keynes revolutionized economic thought with his ideas, including:
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National Income and Employment: Keynes proposed that national income depends on aggregate expenditure. He established the formula C = I + G + (X - M) to analyze this relationship.
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Government Intervention: He argued that the government should intervene to manage the economy and ensure full employment through fiscal policies.
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Investment Decisions: Keynes identified that entrepreneurs’ investment decisions are influenced by expectations of future profits, showcasing the psychological factors in economic behavior.
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Liquidity Preference Theory: He introduced this concept to explain demand for money, highlighting the reasons individuals hold money rather than investing it.