Question

Complete the table below asking for a “snapshot” description of each of the four macroeconomic schools

Model	Source of Business Cycle Fluctuations (i.e., recession)	Major Tenets
New Keynesian View (Mainstream Model)
Classical View (Real Business Cycle Model)
Monetarists
Austrian School

Answer 1

sl No.	Model	Source of Business Cycle Fluctuations	Major Tenets
1	New Keynesian View	information problem and cost of changing prices lead to price rigidity, which cause fluctuation in output and employment	argues that market does not clear always, inspite of individuals( household, firms and labor) working for their own interest
	(Mainstream Model)
2	Classical View	peoples rational expectations about government monetary and fiscal policy determine the behavior of aggregate supply and aggregate demand curve in such a way that real output remaind unaffected	role of individuals rational expectation about future economic events, especially those taking place in the supply side of the economy. Lead by economists : Robert. E. Lucas
	(Real Business Cycle
	Model)
3	Monetarists	money supply is the main determinant of output and employment in the short run and price level in the long run.Empazhises the role of Aggregate Demand for the supply of money	role of money is the central to the growth and stability of national output, not the role of aggregate demand. Lead by economist : Milton Friedman
4	Austrian School	they are the subjective theory of value, marginalism in price theory and the formulation of the economic calculation problem	based on methodological individualism, the concept that social phenomena results exclusively from the motivations and actions of individuals