Classical Economics Overview Quiz

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Questions and Answers

What was a primary characteristic of classical economists' lives, besides their economic thought?

They engaged in economic discussions mostly during their leisure time. (correct)
They were part of a homogenous group with similar professional backgrounds.
They primarily held academic professorships related to economics.
They frequently worked on economic theories together in formal settings.

What was the function of the Political Economy Club in the context of classical economics?

It was a common forum where they presented and debated their economic ideas. (correct)
It was a place where they conducted formal economic experiments.
It was a platform for publishing their economic research papers.
It served as a social club for relaxation and networking.

Which factor contributed to the cohesive identity of the classical economists as a 'school'?

Their shared academic appointments in prestigious universities.
Their frequent co-authorship of economic publications.
Their conscious acknowledgment of each other's work and predecessors. (correct)
Their strict adherence to a singular economic philosophy.

What was a key similarity in the views of Malthus and Ricardo?

They both believed in the social benefits of free markets. (A) Signup and view all the answers

What was Malthus's intellectual background before he became an economist?

He studied both science and mathematics, as well as literature and history. (C) Signup and view all the answers

According to Smith, which of the following is NOT a primary function of the state?

Ensuring equal distribution of wealth (A) Signup and view all the answers

What characteristic of public goods makes it unlikely for the market to provide them adequately?

It is impossible to exclude individuals from consuming them resulting in free-riders (D) Signup and view all the answers

Which of the following best describes Smith's view on how economic growth is best achieved?

Through a system of free competition, free international trade, and a well-functioning public sector. (C) Signup and view all the answers

According to Smith, why is the provision of public goods the duty of the state?

The cost of providing them often outweighs any potential profit for individuals or small groups (C) Signup and view all the answers

According to Smith, what is the main factor in a nation's level of economic development?

The degree to which the economy is free from restrictions and competitive (A) Signup and view all the answers

What was a primary reason why Malthus’s work, 'An Essay on the Principle of Population', underwent multiple revisions?

To incorporate additional empirical evidence gathered from his travels. (C) Signup and view all the answers

What is a basic tenet that Malthus used at the start of his first edition of 'An Essay on the Principle of Population'?

Food is necessary for human existence. (C) Signup and view all the answers

What was the main contrasting view between Malthus and his father regarding the future of mankind?

His father embraced utopian ideals, while Malthus had a more pessimistic outlook. (B) Signup and view all the answers

What was the main premise of Malthus's theory on population as presented in his book?

The relationship between population increase and food production would put a limit on human progress. (A) Signup and view all the answers

Which of the following best describes Malthus's view of Godwin and Condorcet's ideas?

He used their utopian visions as a contrast to introduce his own theory. (C) Signup and view all the answers

Besides population and progress what other topics are related to Malthues’s Population theory?

Poverty and birth control. (A) Signup and view all the answers

What was Malthus's position at the University?

Professor of political economy (D) Signup and view all the answers

How did Malthus's work influence Charles Darwin?

It served as a source of inspiration for Darwin's theory of evolution. (A) Signup and view all the answers

What is a primary factor contributing to wage inequality among different professions?

The varying ease or hardship, skill requirements, and social perception of different employments. (A) Signup and view all the answers

Why do employers generally have a stronger position than employees in wage negotiations?

Employers have more bargaining power as there are generally fewer of them than employees, making it easier for them to agree on lower wages. (C) Signup and view all the answers

What is the 'wage fund', as discussed in the text?

The financial resources that employers control for the purpose of paying wages to employees. (A) Signup and view all the answers

How does the reward for capital compare to wages?

The reward for capital is variable but far less than the variability of wages, based on risk and the work of management. (C) Signup and view all the answers

How is land rent determined, according to the text?

Land rent is essentially determined by a landlord's monopoly, resulting in the tenant paying what the landlord demands, roughly reflecting the difference between the tenant’s income and normal costs. (C) Signup and view all the answers

What is the main idea behind the concept of the 'Invisible Hand' as presented in the text?

Individual self-interest, within a system of free competition, often leads to outcomes that benefit society, even if that was not the intention. (C) Signup and view all the answers

What explanation is given in the text about why some interpretations of the 'invisible hand' focus on domestic investment preferences?

These interpretations are rooted in the belief that shorter versions present the main message better and that competition and efficiency are directly linked. (C) Signup and view all the answers

How do political and institutional circumstances influence wages and profits?

They can greatly influence wages and profits, particularly through private restraint on competition which is supported by governments. (A) Signup and view all the answers

Based on the text, which of the following statements accurately describes the relationship between high wages, profits, and commodity prices?

High wages and high profits are causes of high commodity prices, while high rents are an effect of high prices. (A) Signup and view all the answers

What does the text suggest about the absolute nature of harmony between individual and societal interests?

The text mentions that there can be conflicts between individual and social interests. (A) Signup and view all the answers

What is a primary driver for an individual's investment decisions?

Seeking the greatest possible rate of return on their capital. (D) Signup and view all the answers

The concept of the 'invisible hand' is best understood as which of the following?

A method to counteract market weaknesses and failures. (B) Signup and view all the answers

What does the text identify as the main cause for a monopoly?

Sellers collaborating to control prices, or government privileges. (D) Signup and view all the answers

What are producers primarily focused on when making decisions?

Their own self-interest and profitability. (D) Signup and view all the answers

What does the text suggest about the relationship between competition and prices?

Competition tends to stabilize prices toward their natural levels. (C) Signup and view all the answers

The text states that 'consumption is the sole end and purpose of all production'. What does this imply?

Economic systems should aim to maximize the resources available for consumption. (A) Signup and view all the answers

What constitutes "the public interest"?

The largest expansion of national income and resources for consumption. (D) Signup and view all the answers

According to Malthus, what is the primary relationship between population growth and food production?

Population growth tends to increase geometrically, while food production increases arithmetically. (C) Signup and view all the answers

Why does the text suggest that employers are silent about the effects of high profits?

Because their self interest makes them less likely to discuss their own gains. (C) Signup and view all the answers

What did Malthus identify as the primary long-run mechanism that keeps per capita food supply constant?

Decreasing returns in agriculture, coupled with an infinitely elastic supply of labor at the subsistence wage. (D) Signup and view all the answers

What does 'system of perfect liberty' refer to?

A theoretical model of an economy without market imperfections. (B) Signup and view all the answers

What is the 'subsistence wage' as understood in Malthus's theory?

The level of income just sufficient for the reproduction of the working class. (B) Signup and view all the answers

What can undermine the 'invisible hand'?

Market actors conspiring against public interests. (D) Signup and view all the answers

According to Malthus, what are the main mechanisms that keep the population growth rate in line with food production growth?

Positive checks ('misery') and preventive checks ('vice'). (D) Signup and view all the answers

In the text, what does the 'natural price' represent?

The price that is the lowest sellers can take and still remain in the market. (D) Signup and view all the answers

What does the text indicate about the relationship between the number of sellers and the degree of competition?

An increase in sellers normally results in a greater degree of competition. (D) Signup and view all the answers

Which of the following is a modification Malthus made to his original theory?

He included moral restraint and later marriages as checks on population, not just misery and vice. (A) Signup and view all the answers

What was Malthus's view on the relationship between sexual passion and wealth?

He believed sexual passion would decrease with increasing wealth. (D) Signup and view all the answers

What is a key characteristic of the market when prices are at their natural level?

Producers face prices that are beyond their control. (C) Signup and view all the answers

What was a key criticism of Malthus's theory by some historians?

That his theory did not find a deeper theoretical justification for the arithmetic growth of food. (D) Signup and view all the answers

What does the invisible hand aim to increase?

The annual revenue of society through individual self-interest. (B) Signup and view all the answers

What is mentioned in the text as a potential interpretation of the public good, other than national income?

A more holistic 'social welfare' approach, accounting for different individual interests. (C) Signup and view all the answers

What empirical observation did Malthus use to support his theory of geometrical population growth?

The population growth in the United States doubling every 25 years. (C) Signup and view all the answers

How did Malthus view the long-term consequences of wages being maintained above the subsistence level?

It would lead to population growth that would eventually drive wages back to the subsistence level. (C) Signup and view all the answers

What was Malthus’s overall perspective regarding the future outlook for society?

Pessimistic, due to the tension between population and food supply. (B) Signup and view all the answers

Flashcards

State's Function: Protection from Violence

The state's primary responsibility is to safeguard its citizens against violence and external threats, both from within and from other nations.

State's Function: Protection from Injustice

The state has the role of ensuring fairness and preventing oppression among its citizens. It acts as an impartial arbiter to protect individuals from being exploited by others.

State's Function: Public Goods

The state is responsible for providing essential services that individuals or small groups cannot afford to provide for themselves, even though these services are vital for society as a whole.

What is Economic Growth?

Economic growth refers to the increase in a nation's overall output of goods and services over time. It's a measure of how prosperous a country is.