Brazils Economics Essay

Brazils Economics Essay

… Classical vs. Neo-Classical Economics
The basic and primary model of economics in its early history can be referred to as the classical model of economics, also called the pre-Keynesian model of economics. Classical economics is modeled after the mercantilism form of economy, wherein trade or ‘barter’ of goods and services are the primary activities of an economy. Moreover, in classical economics, money is the medium of exchange in these trades, which implies that money plays an important role in the economy of a nation or organization. Another important principle in classical economics is derived from Adam Smith’s belief that economics is guided by the ‘invisible hand,’ wherein all things (money, flow of goods and services) always move towards equilibrium, that is, the equality allocation of all goods and services.
Neo-classical is different from the classical model because it applies the principles of classical economics to a larger-scale, and focused more on the psychological, or individual motivations of consumers in consuming goods and services, and how these preferences influence the production process and distribution of goods and services. More importantly, neo-classical paradigm of economics does not necessarily subsist to the equivalence of markets, as was …

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