Models of Economics - Research Paper Example

Its main thoughts are that; free markets are better situated to allocate the scarce resources in any economy; minimum government or state intervention in the economy is important and works best (Pindyck & Rubinfeld, 1981). It contends that the supply of money ought to be maintained at equilibrium with money demand. This prevents distortion of the economy through increased money supply, which leads to various evils such as inflation, and excess demand that is not be met by the available supply.

Socialism is an economic system that lies between capitalism and communism. It seeks to redistribute the wealth more equitably through the common ownership of natural resources and key industries such as public utilities and manufacturing industries. The state involves itself in central planning. Production of goods and provision of services, including their prices and distribution is centrally controlled (Pindyck & Rubinfeld, 1981). This economic model puts emphasis on improving developing nations’ economies.

This economic model focuses on ways to stimulate growth in those countries through enhancing aspects such as education, health, working conditions, market and improving both international and domestic policies and systems. Their focus is to figure out how developing/poor countries would be changed into thriving ones (Pindyck & Rubinfeld, 1981). Since political and social circumstances of various countries vary substantially, tactics for turning a poor nation are usually unique and country specific.

For example, the government strives to maintain the economy at equilibrium by either controlling or sharing of natural and state resources or controlling money supply in order to avoid economic distortion through increased money supply. John Keynes’ economic theory is applicable in many economies in the world since it was first developed. Keynes advocated for the regulation of economies using controlled money supply and