Economics quiz #1

Joseph E. Stiglitz

Joseph Eugene Stiglitz is an American economist, public policy analyst, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences

The General Theory

Keyne's theory that brings up the idea of investment Gov't spending can lead to employment Role of government to spend when it needs to argues that the belief that markets naturally tend towards full employment is a fallacy and that state interventionism is, therefore, necessary to overcome economic slumps.

Bourgeoisie

the middle class, including merchants, industrialists, and professional people

Divsion of labor

the type of arrangement in which each worker specializes in a particular task or job

Karl Marx

1818-1883. 19th-century philosopher, political economist, sociologist, humanist, political theorist, and revolutionary. Often recognized as the father of communism. Analysis of history led to his belief that communism would replace capitalism as it replaced feudalism. Believed in a classless society. Thought limited government is the best form of government

Marxism

A branch of socialism that emphasizes exploitation and class struggle and includes both communism and other approaches. society's classes are the cause of the struggle and that society should have no classes proletariat (workers) and Bourgeoisie

Communist Manifesto

A socialist manifesto written by Marx and Engels (1848) describing the history of the working-class movement according to their views.

Wealth of Nations

Adam's smith's book. Discussed stages of evolution of society Free-markets characterize modern society "Consumption is the sole end and purpose of all production." 1) Division of Labor 2) Invisible Hand 3)Political Economy

Milton Friedman (1912-2006)

American economist. Conservative thinker famous for his advocacy of monetarism (a revision of the quantity theory of money) in works like A Monetary History of the United States, 1867-1960 (1963). he is strongly associated with the ideals of laissez-faire government policy. Blamed federal reserve for the growth of economy being slowed Opposed Keney's idea of wage increase and employment increase Proved wrong Not the amount of increase per year of wages, but actually the rate of increase (how often) The illusion of more money for working people will cause them to spend more

John Maynar Keynes

An economist who discussed the end of laissez-faire capitalism. supported government spending when necessary to drive up employment. Believed that after full employment was achieved the market system should operate freely

Monetarism

An idea Pioneered by Keynes that the government should control the money supply to encourage economic growth and restrain inflation. amount of money is going to equal the price, more in-depth supply and demand Thought that is money is slowly added into the economy, there will be a slow increase in prices. It's not saving that drives the economy, not thrift but profit

Thomas Robert Malthus (1766-1834)

Author of An Essay on the Principle of Population that set forth the hypothesis that populations may outgrow their food supply because food supply tends to increase arithmetically while populations increase geometrically

brand recognition

Consumer awareness and identification of a brand

David Richardo

English economist. supported the implementation of free trade. ideas were centered around Scarcity and competition. "economic rent" where the reward is greater than the cost of production

A Theory of the Consumption Function

Friedman's theory that households will not change their rate of consumption/spending based on changes in their income that they perceive as temporary

Malthusian Trap

Malthus's prediction that a rapidly increasing population will overuse natural resources, leading inevitably to a major public health disaster

Proletariat

Marx's term for the exploited class, the mass of workers who do not own the means of production

Marx's labor theory of value

Marx's theory that states that the value of a commodity is based on how long it takes to produce it, that is, the amount of labor required, rather than other cost considerations.

Esther Duflo

New approach to developmental economics Create a few grand questions and then perform experiments Sought to understand the economic lives of the poor, not just to end poverty. Sought to show why poor people end up with entirely different lives, still have the same hopes, etc.

Elinor Ostrom (1933-2012)

Pioneered studying how people in many settings overcome the "tragedy of the commons" (i.e., the problem that common ownership or lack of ownership will often lead to overuse and depletion of resources).

Theory of Comparative Advantage

Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers. a country can profit from international trade by specializing in the production of a good This lowers the production and saves money. Advantage as a country depends on the resources your country has

Theory of Value

Richardo's belief that all value is tied directly to labor costs, a direct proportion between the price of good and the natural price of labor

Theory of Rent

Richardo's theory that population growth equals more food. Need more land to grow more food. With a higher demand for food, the cost can be amped up and lead to a higher profit for the people who own land.

Doctrine of Fiscal Equivalence

Richardo's theory that suggest that the government's initiative to increase debt-financed government spending for the purpose of stimulating demand does not affect the demand due to the public's consciousness to save excess money for the payment of future tax increases in lieu of the debt settlement.

Ricardo's Theory of International Trade

Richardo's theory. Contradicts one of his previous theories. Suggested that industry specification combined with free international trade would produce an increase of wealth across the board

Adam Smith

Scottish economist who wrote the Wealth of Nations a precursor to modern Capitalism. Smith argued that by giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening the markets up to domestic and foreign competition, people's natural self-interest would promote greater prosperity than with stringent government regulations.

Absolute Advantage Theory

Smith's theory that a country has an absolute advantage in the production of a product when it is more efficient than any other country at producing it. The government must be free from the market and competition must be in full range. competition will benefit produces and consumers. When competition is increased then the price of commodities tends to decrease resulting in more demand and so more profit.

Information Theory

Stiglitz's theory that in transactions sometimes one party has more info, and then there is an imbalance of power -- leads to the advantages of the 1% Majority suffer Self-selection and screening - allows normal people to get stock information and make moves on the stock market If all companies had the same information, they would all pay their workers the same same Imperfections happen because of incomplete information

Lassaiz Faire

a hands-off approach to government

invisible hand

a term coined by Adam Smith to describe the self-regulating nature of the marketplace

Theory of distribution

linked to the theory of rent and value- the maximum level of economic rent results from the marginal cultivation of the land