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Economic Thought and Theory
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Economic Thought and Theory
Economic Thought and Theory
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1
Question
What is the origin of the word 'economics'?
Answer
The word 'economics' comes from the Greek word 'oeconomicus', which means management of the household.
2
Question
Who engaged in economic thinking by distinguishing between natural and unnatural arts of acquisition?
Answer
Aristotle (384-322 B.C.) engaged in economic thinking by distinguishing between natural and unnatural arts of acquisition.
3
Question
What benefits did Plato (427-347 B.C.) write about?
Answer
Plato wrote of the benefits of human specialization within the ideal city-state.
4
Question
What idea did St. Thomas Aquinas (1225-1274) advance regarding prices?
Answer
St. Thomas Aquinas advanced the idea of a just price, one in which neither the buyer nor the seller takes advantage of the other.
5
Question
What was the state of trade before 1500?
Answer
There was little trade before 1500, and most goods were produced for consumption in the community that produced them without first being sent to market.
6
Question
What major changes occurred in markets and trade after 1500?
Answer
Markets and trade expanded rapidly after 1500, with the great geographical explorations both resulting from this process and accelerating it.
7
Question
What age began to supplant the age of moral philosophy in the 1500s?
Answer
The age of political economy began to supplant the age of moral philosophy in the 1500s.
8
Question
Why study Economic Theory?
Answer
1. Understanding how economies work through mechanisms like supply and demand, market equilibrium, inflation, unemployment, and economic growth. 2. Achieving economic goals by providing tools and frameworks for goals like economic growth, full employment, price stability, and equitable income distribution.
9
Question
Why study the History of Economic Thought?
Answer
Studying the history of economic thought enhances understanding of contemporary economic theory, helps make fewer errors in personal and policy decisions, and provides perspective on changing ideas and problems.
10
Question
What were the main principles of the Mercantilist school of thought (1500-1776)?
Answer
1. Gold and silver are the most desirable form of wealth. 2. Nationalism. 3. Duty-free importation and export restriction of raw materials. 4. Colonization and monopolization of colonial trade. 5. Opposition to internal tolls, taxes, and other restrictions on the movement of goods. 6. Strong central government. 7. Importance of a large, hardworking population.
11
Question
Who were the beneficiaries of the Mercantilist school?
Answer
The beneficiaries of the Mercantilist school included merchant capitalists, kings, and government officials.
12
Question
How was the Mercantilist school valid, useful, or correct in its time?
Answer
Bullionism made sense during the shift from a self-sufficient to a money-based economy, providing essential funding for wars, paying soldiers, and supporting commerce.
13
Question
What lasting contributions did the Mercantilists make to economics?
Answer
The Mercantilists made lasting contributions by emphasizing the importance of international trade and developing the idea of the balance of payments.
14
Question
What concepts summarize the Physiocratic school of thought (1759)?
Answer
The concepts include natural order, laissez-faire, emphasis on agriculture, taxation of landowners, and the interrelatedness of the economy.
15
Question
Who would ultimately benefit from the Physiocrats' ideas?
Answer
Peasants would ultimately benefit from the Physiocrats' ideas by ending their heavy obligations to landowners.
16
Question
What were the critiques of the Physiocratic school?
Answer
The critiques included that physiocracy idealized the capitalistic farmer and viewed industry and trade as unproductive.
17
Question
What key ideas were associated with Mercantilism?
Answer
1. Focus on international trade and balance of payments. 2. Support for government regulation to benefit the nation. 3. Elevation of merchants' status in society.
18
Question
What were the critiques of Mercantilism?
Answer
Critiques of Mercantilism included missing the benefits of specialization and free trade and incorrectly linking higher wages to reduced labor participation.
19
Question
What key ideas were associated with Physiocracy?
Answer
1. Valued agriculture as the only productive sector. 2. Proposed taxing landowners based on wealth from land. 3. Advocated for laissez-faire with minimal government interference.
20
Question
What were Mercantilism's contributions and legacy?
Answer
Mercantilism helped develop trade policies and nationalism.
21
Question
What were the contributions and legacy of the Physiocrats?
Answer
Physiocrats laid the foundation for economics as a social science and laissez-faire principles.
22
Question
What did the Classical School emphasize?
Answer
The Classical School emphasized the role of markets in determining wealth and efficiency through the mechanism of supply and demand.
23
Question
Who is Richard Cantillon and what are his contributions?
Answer
Richard Cantillon (1680-1734) is considered a precursor of classical economics, introduced the idea of the 'entrepreneur', and analyzed economic exchange, the role of money, and price fluctuations.
24
Question
What is the intrinsic value of goods according to Cantillon?
Answer
Cantillon proposed that the value of goods is determined by the labor and resources that go into producing them, an early precursor to the labor theory of value.
25
Question
What is the circular flow of income concept introduced by Cantillon?
Answer
Cantillon described the economy as a circular flow, where money circulates between producers and consumers.
26
Question
Who is François Quesnay and what is his significance?
Answer
François Quesnay (1694-1774) was the leader of the Physiocrats and authored the 'Tableau économique', advocating for laissez-faire.
27
Question
What is the Price-Specie Flow Mechanism developed by David Hume?
Answer
Hume developed the theory that trade imbalances would self-correct through changes in the money supply.
28
Question
What key contributions did Adam Smith make to economics?
Answer
Key contributions of Adam Smith include the Invisible Hand, division of labor, free markets and laissez-faire, the theory of value and wealth, and the role of government.
29
Question
What is Malthusian Theory?
Answer
Malthusian Theory posits that population growth will outpace food supply growth, leading to disease, famine, and calamity.
30
Question
What historical context influenced Malthus's theories?
Answer
The increase in poverty, the Speenhamland System, and the Corn Laws during his time influenced Malthus's theories.