IAI Actuarial Core Principles · Business Economics · Main economic schools and their key features
Which pairing of school and a key feature is correct?
The correct pairing is the Austrian school with subjective value and dispersed knowledge communicated by market prices. The other options reverse the schools: New Classical assumes flexible clearing markets, New Keynesian stresses rigidities, and Austrians distrust aggregate modelling and central planning.
- AAustrian school: subjective value and dispersed knowledge conveyed through market pricesCorrect
- BNew Classical school: wages and prices are assumed rigid for long periods
- CNew Keynesian school: markets always clear instantly with perfect information
- DNew Classical school: government demand management is the main stabiliser
- Austrian school: econometric modelling of aggregates is the preferred method
Explanation
Austrians stress subjective value, methodological individualism and Hayek's point that prices transmit dispersed knowledge. New Classical assumes flexible, clearing markets, and New Keynesian assumes rigidities and imperfect competition. Austrians are generally sceptical of aggregate econometrics.
Did you get it right without looking?
One question tells you little. A timed set on Main economic schools and their key features shows your real accuracy, how long you take and where you lose marks.
More Main economic schools and their key features questions
- A New Keynesian economist explains why a fall in aggregate demand can reduce output for a long time. Which explanation is most consistent wi…
- The Lucas critique is best described as which of the following arguments?
- Which of the following is a feature of the neoclassical approach that distinguishes it from the classical school's treatment of value?
- According to New Classical economists, why is a systematic and fully anticipated increase in the money supply unlikely to raise real output …
- Which statement best reflects the institutional school of economics in its approach to analysing firms and markets?
- Which statement best describes the Marxian view of the relationship between the 'base' and the 'superstructure' in historical materialism?