History of Economic Thought Exam 1

C

*graph in notes* The long-run supply of labor is given by the line BFJ. In the absence of any taxes on or subsidies for unskilled labor, the equilibrium of the market will be at F. Suppose that the government now subsidizes wages in the amount FG. What will be the long run equilibrium amount of labor? a. OD b. DH c. OH d. DF e. DG

D

A coffee shop employs 10 people and produces total revenues of $2,000 dollars per day. Each employee works 8 hours per day, and earns $10 per hour. Therefore, according to Marx, the rate of exploitation is _____. (Ignore the depreciation on the coffee makers etc.) a. 0% b. 25% c. 50% d. 150%

communism

A specter is haunting Europe; the specter of _________.

Say. Its own demand

According to Jean Baptiste _____; supply creates _____________.

D

According to Karl Marx, the goal of capitalists is to maximize ____. a. the amount of commodities produced b. the amount of investment c. the rate of profit d. the rate of exploitation

D

According to Malthus the food supply grows arithmetically while population tends to grow geometrically. Of the following pair which is an arithmetic sequence of the type that Malthus had in mind, followed by a geometric sequence? a. 1, -1, 1, -1 ----- 1,2,3,4 b. 1,2,3,4 ----- 1,5,9,13 c. 1,2,4,8 ----- 1,2,3,4 d. 1,2,3,4 ----- 1,2,4,8

D

Adam Smith advocated "the real bills doctrine," which is the idea that _____ a. parliament should restrict itself to laws concerning the military, education, and scientific progress b. only gold and silver or paper money backed by gold and silver in the vaults of banks should be allowed to circulate c. real interest rates are the difference between the nominal rate shown on the loan and the rate of inflation d. banks should restrict themselves to short-term loans that finance purchases or sales of commodities.

D

Adam Smith argued that banks should not be allowed to issue bank notes in _____ denominations in order to _____. a. large, to discourage illegal gambling b. small, to lower interest rates c. large, protect the poor in case of a bank failure d. small, protect the poor in case of a bank failure

A

Adam Smith argued that men working in mines would earn _____ than men working as shop clerks because _____. a. more, mining was a dangerous, dirty job b. more, was more important to the government c. less, shop keeping was reserved for the upper classes d. less, mining was a dangerous, dirty job

B

Adam Smith favored usury laws because he thought that they ____. a. protected widows and orphans from exploitation b. channeled money toward sober men of business and away from speculators c. deflected legislators from more destructive attempts to regulate capital markets d. helped manufacturers at the expense of farmers

C

Adam Smith felt (according to the lecture) that a. Men were incapable of sympathizing with others b. Men were capable of sympathizing with others and sympathy was an important check on the dog-eat-dog philosophy of the market place c. Men were capable of sympathizing with others, but this was an insufficiently powerful force to guide society d. Sympathy was more important, generally than self-interest

B

Adam Smith likened banking to ___. a. a visible fist b. a wagon road through the air c. a casino d. a steam engine that never runs short of coal or water

D

Adam Smith thought that the best way to improve quality of College teaching would be to _______. a. require professors to take courses in teaching b. prohibit professors from making "outside" money by consulting, writing textbooks, etc. c. require professors to spend some time in a real job ("in the marketplace") before they could begin teaching d. permit professors to sell special permissions for their classes f. do nothing, because nothing could possibly improve teaching at Rutgers

A

Consider the following information which represents a cotton textile mill with the value of total output broken down according to the Marxist schema. Variable Amount C = constant capital (Machinery) $150 V = variable capital (Labor) $150 S = Surplus Value $150 Continue the previous question. What is the rate of profit? a. 50% b. 100% c. 200% d. 300%

C

Consider the following information which represents a cotton textile mill with the value of total output broken down according to the Marxist schema. Variable Amount C = constant capital (Machinery) $150 V = variable capital (Labor) $150 S = Surplus Value $150 What is the total value of output for this cotton mill? a. $150 b. $300 c. $450 d. $600

A

David Hume believed that an increase in the stock of money would produce an increase in _______ in the short run and an increase in _____ in the long run. a. output, prices b. prices, output c. output, output d. prices, prices

A

David Ricardo argued that the appropriate governmental response to the Depression that followed the Napoleonic War was ____. a. do nothing and wait for the natural recovery process of the economy to take place b. build more roads, lighthouses, etc. c. expand the money supply d. restrict imports

D

David Ricardo blamed the inflation during the Napoleonic War on ___. a. flows of gold and silver from Spain b. rising interest rates c. the monopoly power of big business d. The Bank of England

Bastiat means a railroad that has so many breaks in it, it no longer serves it purpose because it is serving the producers

What does Bastiat mean by "a negative railroad"?

A

David Ricardo developed his theory of comparative advantage in order to show that a. the Corn laws should be repealed b. the Corn laws should be strengthened and applied to other commodities c. the industrial revolution was impoverishing the working class d. the industrial revolution was based on the suffering of American slaves

C

David Ricardo's numerical examples showing how rent is determined, and how two countries gain from trade, support which of the following economic policies? a. a voucher system for higher education b. a negative income tax c. repeal of the Corn laws d. continuation of the Corn laws

A general excess supply of goods and services. A depression.

Define 'General Glut as the term was used by Malthus and Ricardo

an invisible hand

He ... neither intends to promote the public interest, nor knows how much he is promoting it ... he intends only his own gain, and he is in this, as in many other cases, led by ____.

B

Henry George was a famous American economist, journalist, and politician who was inspired by David Ricardo. He created the _____. a. anti-corn law league b. single tax movement c. the league for redistributive justice d. the one-world labor movement

Coins made of silver from Potosi caused inflation.

Here is a picture of the great mine at Potosi Bolivia. What did it have to do with the "Price Revolution"?

silver

Here is a picture of the great mine at Potosi Bolivia. What were they mining here?

William Wood worked 15 hours a day at 7 years and 10 months old. His trade was running molds (he would run ready-made molds into the drying room and bring back the empty molds).

How many hours per day did William Wood Work? How old was he? What was his trade?

he man would sympathize with the other country, but overall go about his day, and would react much harsher to his finger being cut off tomorrow because he cares more about himself than others

How would a man of humanity in Europe respond to the news that the Great Empire of China with all its myriads of inhabitants, was suddenly swallowed up by an earthquake? How would that same man respond to the news that he was to lose his little finger tomorrow?

C

In Adam Smith's Theory of Moral Sentiments the "impartial spectator" can be likened to a. an individual in a country in which you have no personal or intellectual connections b. someone who is in worse circumstances than yourself, but with whom you can sympathize c. your conscience d. the "man without a country" e. someone who is in better circumstances than yourself, but with whom you can sympathize

B

Malthus based his idea that land could only grow arithmetically on a. data from the northern United States compiled by Benjamin Franklin b. a thought experiment about increasing agricultural production c. the trend in agricultural prices in the eighteenth century d. nothing at all -- it was just an assumption

B

Marx thought that one school of thought replaced another because ____. a. the new school made better predictions than the old school b. as the economy changed, economists had to come up with new theories to flatter the new bosses.

C

Name all the schools of thought that were identified in the lecture. A Mercantilism, B the Classical School, C the Institutional School, D the Rutgers School a. A b. A +B c. A +B +C d. A +B +C+D

C

Portugal and England are trading wine and cloth. According to John Stuart Mill the equilibrium world price of cloth in terms of wine (or wine in terms of cloth) ___ a. would be completely indeterminate b. would be indeterminate, but would fall between the autarky prices in England and Portugal. c. would fall between the autarky prices in England and Portugal, and would depend on English demand for wine compared with Portuguese demand for cloth d. would be lower than the autarky price in Portugal or England, whichever was lower.

Malthus believes that the Parish laws contributed to raise the price of provisions and lowered the real price of labor. So, they have contributed to the impoverishment of a class of people (poor class) whose only possession is their labor. Nowadays we usually refer to these laws as the Poor laws. They provided help for the poor. But it was the responsibility of each Parish (small area with a church) to take care of its own poor. Adam Smith criticized this aspect of the Poor laws, because they reduced the mobility of labor. If you moved to another Parish and lost your job, the Parish you moved to was not obligated to help you.

What does Malthus think was the impact of the Parish laws on the poor people of England?

banking, great until you fall

What is like a "wagon road in the sky?"

high rates of inflation in Europe during the 17th century

What is the "Price Revolution?"

our conscious

What is the "impartial spectator?"

one industry expands too much during the boom, creating a monopoly

What is the disproportionality crisis?

the poorest quality of land brought into production; (ex. Farm B)

What is the extensive margin?

amount of labor on best land (ex. 2 on A)

What is the intensive margin?

different circumstances lead people to have different wages because their jobs are more dangerous, insecure, stable, costly, etc

What is the theory os equalizing differences?

We should find an interest?

What should you do if you have suffered a great personal loss in your life?

Banks should make only short-term loans collateralized by physical commodities.

What was the "Real Bills Doctrine"?

Reglement organique is a code of corvee in which every Wallachian peasant owes to the landlord 12 days of labor, one day of field labor, and one day of wood carrying. Jobagie is service due to the lord for extraordinary occasions. Marx's point is that work by tenants can keep the place they living up and running?

What was the "Reglement organique"? What was the "jobagie"? What is Marx's point?

Workers would never experience an increase in their real wage. There wage will always be the minimum needed to support and reproduce themselves.

What was the "iron law of wages?"

Manchester cotton mills

What were "dark satanic mills?"

he factory acts improved the working conditions for children working in factories.

What were the "factory acts." What factors did Marx think were important in getting the factory acts adopted?

dictatorship of the proletariat

What will happen during the transition to communism?

1866

What year was the worst financial crisis before Das Kapital

1846

What year were the corn laws repealed, making Britain a free-trade country

1776

When was the Wealth of Nations released?

A

Whig history is _____. a. history which concludes that we progress toward better and better ideas b. the history of artificial hair pieces

The petition is from the manufacturers of candles, tapers, lanterns, candlesticks, street lamps, snuffers, and extinguishers, and from the Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting

Who is "the petition" from?

Napoleon?

Who is the bad guy "the petition" is complaining about?

People specializing in the task they are good at means they can do it quicker than someone who is not as proficient in the task and of better quality, so an assembly line would produce faster. It increases the worker's dexterity. It is also harder to stop what one is doing and pick up a new task, so focusing on one aspect of it saves time. Science improves because people learn ways to adapt to their machines and create new ones. 3. How do we get what we want from the butcher, the baker, and the brewer? We provide them with something they want. We barter with them and provide something for them in order to fulfill their needs and their self-love. By treaty, barter, or purchase.

Why does an increase in the division of labor produce an increase in productivity?

A free market of labor, premiums for fresh land (agriculture over manufactures), and for extreme distress situations to be able to go to a county workhouse to be paid for their work at the market price.

With what would Malthus replace the Parish laws?

velocity fluctuates too much, central bank needs discretion; John Stuart Mill

banking school

money fluctuates too much, control the bank of England with rules; David Ricardo

currency school

surplus value/ hours for yourself

rate of exploitation

promoting your own desires through self-interest

what is the "invisible hand?"

people petitioning for the government to look domestically for light

"Petition of Candlemakers"

B

"The Adam Smith Problem," as Historians of Economic Thought know it, is the apparent contradiction between _______ and ________. a. The Impartial Spectator, the Wealth of Nations b. The Theory of Moral Sentiments, the Wealth of Nations c. Smith's theory that Laissez Faire is the best economic policy, clear evidence that it doesn't work d. Smith's theory that Laissez Faire is the best economic policy, Smith's support for usury laws

the extent of the market

"The Division of Labor is limited by _____.

A

Before he published the Wealth of Nations, Adam Smith published his famous book: a. The Theory of Moral Sentiments b. The Impartial Spectator c. The Theory of Social Distance d. The Rhetoric of Discourse

it sucks

Capital is dead labor, that, vampire-like, only lives by sucking living labor, and lives the more, the more labor _________.

B

Consider the following information which represents a cotton textile mill with the value of total output broken down according to the Marxist schema. Variable Amount C = constant capital (Machinery) $150 V = variable capital (Labor) $150 S = Surplus Value $150 Continue the previous question. What is the rate of exploitation? a. 50% b. 100% c. 200% d. 300%

B

In The Theory of Moral Sentiments, Adam Smith argued that___ a. People are motivated almost entirely by rational self-interest b. People feel sympathy for others, but the amount of sympathy declines as you move further away "in social distance." c. the state has an important role to play in compensating for the negative consequences of market forces d. people are motivated as much by base passions such as lust and religious fanaticism as by self interest

D

In the Wealth of Nations Adam Smith criticized ____. a. socialism b. communism c. syndicalism d. mercantilism

too much money chasing too few goods

Inflation is ______

The working day is a variable quantity

Is the working day a constant or a variable?

own self-interest

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their _____.

D

Karl Marx gave up scuba diving because ____. a. He was recruited by a professional basketball team and the coach didn't want him to do any other sports b. His mother thought it was too dangerous. c. He never saw anything interesting because the water around Britain was cloudy. d. He couldn't get the mask over his beard.

A

Some economists believe that the Crisis of 2008 was triggered by the failure of Lehman Brothers. Adam Smith believed that the Crisis of 1772 was triggered by the failure of _______. a. the Ayr Bank b. the Scottish Linen Company c. the Bank of Scotland d. the Royal Bank of Scotland

D

Spanish writers of the 16th century were among the first to think about the quantity theory of money because Spain was experiencing ____. a. inflation caused by excessive government spending b. deflation caused by high interest rates c. inflation caused by her involvement in wars d. inflation caused by the influx of precious metals from the new world.

C

The Corn Laws were laws that: a. used government issued rations to control the distribution of grain in Britain during famines b. prohibited the production ofgrain in Great Britain on ecologically fragile land c. restricted the importation of foreign grain into Great Britain triggered by high grain prices d. lowered British tariffs on foreign grain e. prohibited false whiskers or exploding cigars on the British stage

change it

The Philosophers have only interpreted the World in Various Ways. The Point is to _________.

private property

The theory of the Communists may be summed up in the single sentence: Abolition of _________.

He means to divide the production of a good into multiple parts, so people specialize in what they are good at.

What does Adam Smith mean by the "Division of Labor?"

B

Thomas Malthus argued that the appropriate governmental response to the Depression that followed the Napoleonic War was ____. a. do nothing and wait for the natural recovery process of the economy to take place b. build more roads, lighthouses, etc. c. expand the money supply d. restrict imports

"To the Honorable Members of the Chamber of Deputies

To whom is "the petition" addressed?

an argument against free trade; if you allow new companies in your country to develop by keeping out trade, it allows the country to have a long-run advantage

What are "infant industries?"

Having a large market where there are the right amount of suppliers of goods. Being close other civilizations and close to a body of water that is useful.

What common feature explains where great civilizations first arose?

The United States; the means of subsistence have been more than ample, the manners of the people more pure, and the checks to early marriages fewer

What country has been able to double its population every 25 years? Why has it been able to do this?

He recovered his tranquility by feeding a spider

What did the fashionable and frivolous Count du Lauzon do when confined to the Bastille during the French Revolution?

Lockjaw

What disease, according to Marx, was particularly associated with the manufacture of "Lucifer" matches?

population growth causes misery

What does "Malthusian" mean?