Match the following schools of economic thought with

Solution

I. Keynesian Economics — (B) The General Theory of Employment, Interest, and Money Published in 1936 by John Maynard Keynes, this is arguably the most influential economic text of the 20th century. It shifted the focus from supply-side "Say's Law" to aggregate demand, arguing that market economies do not always self-correct to full employment and may require government intervention (fiscal policy) to end recessions. II. Monetarism — (C) A Monetary History of the United States, 1867–1960 Co-authored by Milton Friedman and Anna Schwartz in 1963, this work provided the empirical backbone for Monetarism. It famously argued that the Great Depression was caused by a massive contraction of the money supply by the Federal Reserve, rather than a lack of investment as Keynes had suggested. III. Behavioural Economics — (A) Nudge: Improving Decisions about Health, Wealth, and Happiness Written by Richard Thaler and Cass Sunstein (2008), this book popularized the application of psychology to economics. It explores how "choice architecture" can influence people's decisions without restricting their freedom, challenging the "Rational Agent" (Homo Economicus) model of classical economics. IV. New Classical Thought — (D) Expectations and the Neutrality of Money This 1972 paper by Robert Lucas Jr. is a cornerstone of New Classical Macroeconomics. It introduced the Rational Expectations Hypothesis to the field, suggesting that because people anticipate government policy changes, systematic monetary policy cannot be used to manipulate real output in the long run. V. New Keynesian Thought — (E) Staggered Wage Setting in a Macro Model This 1979 work by John B. Taylor (and similar work by Stanley Fischer) provided the "micro-foundations" for New Keynesianism. It explains why wages and prices are "sticky" (don't adjust instantly) due to overlapping contracts, justifying why monetary policy still has real effects in the short run even if expectations are rational.