Classical Economics (1776-1890)

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Questions and Answers

Which economist is credited with the statement 'supply creates its own demand'?

David Ricardo

Jean-Baptiste Say (correct)

Thomas Malthus

Bernard Mandeville

What is the first assumption of classical economics mentioned in the text?

Saving-investment equality

Aggregate production of goods and services

Flexible prices (correct)

Say's law

Which economist is associated with the work 'Principles of Political Economy and Taxation'?

Thomas Malthus

John Stuart Mill

Adam Smith

David Ricardo (correct)

What idea did Jean-Baptiste Say contribute to classical economics?

Say's law Signup and view all the answers

In classical economics, what does the saving-investment equality ensure?

Consumption into saving is replaced by an equal amount of investment Signup and view all the answers

According to classical economics, what is the fundamental principle of the classical theory?

The economy is self-regulating and capable of achieving the natural level of real GDP Signup and view all the answers

What was one of David Hume's contributions to economic thought?

Development of ideas on private property, inflation, and foreign trade Signup and view all the answers

What was David Hume best known for?

Highly influential system of radical philosophical empiricism, skepticism, and naturalism Signup and view all the answers

According to classical economics, what are free markets considered to be?

In some sense optimal mechanisms Signup and view all the answers

What is the natural level of real GDP according to classical economics?

The level of real GDP obtained when the economy's resources are fully employed Signup and view all the answers

What is the third assumption of classical economics mentioned in the text?

Saving-investment equality Signup and view all the answers

According to classical economics, what does Say's law state?

Supply creates its own demand Signup and view all the answers

In classical economics, what does the first assumption of flexible prices imply?

Markets adjust quickly to equilibrium Signup and view all the answers

Which economist is associated with the work 'Principles of Political Economy and Taxation'?

David Ricardo Signup and view all the answers

What is the natural level of real GDP according to classical economics?

Always at full employment level Signup and view all the answers

According to classical economics, what is the fundamental principle of the classical theory?

The economy is always capable of achieving the natural level of real GDP Signup and view all the answers

What did David Hume contribute to economic thought?

Ideas on private property Signup and view all the answers

What was one of the main focuses of classical economics?

Long-run economic processes Signup and view all the answers

Which influential figure was influenced by David Hume's system of radical philosophical empiricism, skepticism, and naturalism?

Adam Smith Signup and view all the answers

According to classical economics, what is the natural level of real GDP?

The level of real GDP obtained when the economy's resources are fully employed Signup and view all the answers

Study Notes

Classical Economics

Jean-Baptiste Say is credited with the statement "supply creates its own demand".
The first assumption of classical economics is that prices are flexible.
David Ricardo is associated with the work "Principles of Political Economy and Taxation".
Jean-Baptiste Say contributed the idea that "supply creates its own demand" to classical economics.
The saving-investment equality ensures that the amount saved is equal to the amount invested in the economy.
The fundamental principle of the classical theory is that the economy is self-correcting and will always return to full employment.
David Hume contributed to economic thought by developing the concept of the "specie-flow mechanism".
David Hume was best known for his philosophical empiricism and skepticism.
According to classical economics, free markets are considered to be self-regulating and efficient.
The natural level of real GDP is the level of output that would occur if all prices were flexible and all markets were in equilibrium.

Influences and Assumptions

The third assumption of classical economics is that the labor market is competitive.
Say's law states that "supply creates its own demand".
The first assumption of flexible prices implies that prices will adjust quickly to changes in supply and demand.
Immanuel Kant was influenced by David Hume's system of radical philosophical empiricism, skepticism, and naturalism.
One of the main focuses of classical economics was the analysis of the economy's long-run growth and development.

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Description

Explore the key concepts of classical economics between 1776 and 1890, including the focus on long-run economic processes, optimism about free markets, and the self-regulating nature of the economy. Test your understanding of economic growth and the distribution of income over time.