What Caused The Great Depression

7 Pages 1638 Words

equivalent of the phlogiston theory), its adherents are some of the harshest critics of Keynesian interventions. The greater of the two economic systems used has got to be Keynesian.
The exact cause of business cycles is one of the biggest problems in economics. There are several explanations. The current Keynesian models rely on what is referred to as "sticky wages" (or "sticky prices") to explain why the cycles occurs. Under these models, wages or prices fail to reach their market clearing level. The Austrian School explanation is that all business cycles are due to government intervention in the economy. In particular, government efforts to manipulate the interest rate causes a boom and bust cycle because people over-invest ("mailnvestment") when interest rates are low and when interest rates are Raised to stave off the inevitable inflation, a bust is caused due to the mismatching of consumer and business goods. There are six depressions in American history that is thought to be the worst...