Hist Econ (Exam Review Q&A)

  1. What is Economics and how can you define it?

1.1.  Economics is the study of the use of scarce resources that have alternative uses. Basically there are people and people need resources to fulfill their desires (wants and needs). These resources cannot be infinite but the desires can be limitless. So people have to make choices how to use these resources to satisfy what needs and wants they have by making choices based on priority.

  1. And what is the difference between Macroeconomics and Microeconomics?

2.1.  Macroeconomics studies the behavior and functioning of the entire economy. Microeconomics studies the behavior of individual agents and markets.

  1. What is the difference between Positive and Normative Economics?

3.1.  Positive economic studies and analyze WHAT IS in an economic environment. Normative Economics studies WHAT OUGHT TO BE. For example, A Positive Question is “Why do people use money?”, while a Normative Questions is “Should people use money?”

  1. Who is Homer and what is his idea of economics?

4.1.  The economic society, for Homer, was led by the hero warriors because they had higher moral values and their riches were obtained through acts of valor while merchants were more guided by greed and profit.

  1. And how do you compare him to Hesiod?

5.1.  Hesiod was convinced that men must work hard the land because the gods would only reward those who dedicated their time to work. Work was considered an act of devotion to gods because the gods gave the land as gift to the men so that they would find sustainment from its cultivation. Men had to choose between work and leisure but a life indulging in leisure whould have offended the gods. Resources were scarce so men had to exchange and compete to ensure good life.

  1. Xenophon is considered one of the early economists? Can you explain why?

6.1.  He wrote the Oiknomikos or Household Management. In this writing, he claimed that leaders of the society had to be knowledgeable, fanatic of discipline and order, and efficient administrators. Effective production meant the efficient use of resources and disciplined division of labor

  1. What is Plato’s concept of Ideal State?

7.1.  He thought that nor democracy or tyranny or oligarchy were good forms of government. Philosopher Kings were the best alternative for the betterment of a just society. Men were supposed to specialize according to their natural talents because the prosperity of an economy lies in interdependence. Good rules and fair law must be applied fairly to everyone

  1. Can you explain the concepts of Justice and Exchange in Aristotle?

8.1.  Aristotle was certain that any legal system was supposed to be fair but righteous. He believed in various levels of justice, the last being the High Court of Justice. Many of today’s Law System or Justice System are based on Aristotle’s concept of Justice. Distributive justice = good or honors or sentences must be divided equally between men according to their merit. Rectificatory Justice = putting right previous injustices by compensating who has lost out. Reciprocal justice = justice based in exchange between two parts

  1. While Aristotle was not so convinced that acquisition of wealth was not good for the economy?

9.1.  Aristotle like Plato, Socrates, Xenophon, believed in good life. Natural ways of acquiring wealth were ones that increases the stock of goods necessary to live a good life. The search or accumulation of wealth had to have limits. When a man had reached finally enough wealth to live a good life he had no reason to become greedy.

9.2.  Commerce was considered morally not as good as estate management but necessary because exchange was important for the acquisition of goods not available in the polis.

9.3.  The merchants had to be taxed by the rulers because the rulers had to build walls and protection for the merchants and organize an army for defense.

9.4.  But trade and exchange just for the sake of making money were not allowed. The goods exchanged had to have a purpose and being demanded by the market and merchants were to offer what was demanded not goods of no use.

  1. Tell me about the economics of the Roman Empire

10.1.                  The Roman Empire was the post-Roman Republic period of the ancient Roman civilization, characterized by government headed by emperors and large territorial holdings around the Mediterranean Sea in Europe, Africa and Asia. The city of Rome was the largest city in the world c. 100 BC – c. 400 AD, with Constantinople (New Rome) becoming the largest around 500 AD,[5] and the Empire’s populace grew to an estimated 50 to 90 million inhabitants (roughly 21% of the world’s population at the time).[6]

10.2.                  The Roman Empire held sway over an estimated 70 million people, at that time 21% of the world’s entire population.

10.3.                  The Roman Empire was among the most powerful economic, cultural, political and military forces in the world of its time. It was one of the largest empires in world history.

10.4.                  The Roman Empire was remarkably multicultural, with “a rather astonishing cohesive capacity” called “Romanness”.[80] Personal relationships—patronage, friendship (amicitia), family, marriage—continued to influence the workings of politics and government, as they had in the Republic.[84]

10.5.                  Women, freedmen, and slaves had opportunities to profit and exercise influence in ways previously less available to them.[88] Social life in the Empire, particularly for those whose personal resources were limited, was further fostered by a proliferation of voluntary associations and confraternities (collegia and sodalitates) formed for various purposes: professional and trade guilds, veterans’ groups, religious sodalities, drinking and dining clubs,[89] performing arts troupes,[90] and burial societies.[91]

10.6.                  The concept of natural laws provided the foundation for the field where the Romans made perhaps their greatest contributions: jurisprudence. Roman law exerted a major influence over subsequent legal systems. More important, many significant economic ideas were articulated in Roman commercial law

10.7.                  The idea of corporation as guarantor of professionalism and efficient production was essential for the stability and proliferation of excellent manufacturing of products and goods which made Roman quality known all over the Empire.

  1. Can you tell me what were the causes determining the decline and final fall of the Roman Empire

11.1.                  No more expansionism and conquer of new nations, no currency policy to protect the Roman currency from market speculation, inefficient tax collection system, high corruption at every level of the bureaucratic imperial system, decrease of army inscription because also decadent finance for the development and upgrade of the army in view of the mounting rebellious colonies of Northern Europe

  1. Why the Judaism, basically a religion, became a powerful economic lobby after the fall of the Roman Empire?

12.1.                  Because it was not in contrast with the Roman religion and never doubted the authority of the Empire. Judaism did never try to subvert the system of law and administration of Rome. Rather Judaism used the Roman system to develop and spread throughout the Empire.

  1. Can you tell me something about the concept of economics in the Early Christianity

13.1.                   In the Old Testament:

13.1.1.  1. Man must be righteous and honest to God before being to fellow men,

13.1.2.  2. Only the poor will find the heaven,

13.1.3.  3. Money is corrupting the soul.

13.2.                  With the New Testament, the economic idea of the Old Testament is pushed aside. According to St Paul, the rich people should not count in keeping riches because when the end of times will arrive no money will protect from the divine justice.

13.3.                  However, when the Church notices that the prophecy was not going to happen then there was a change of economic idea in the Church. We must remember that the thinkers of economics of the Church were all fathers, priests and monks not businessmen. For them, detachment from money and riches was the best choice in life.

13.4.                  However, the Church preferred if people worked and made money then do nothing. Laziness was considered a sin and a way to corruption.

  1. Why for Islam good economics was fundamental for expansion?

14.1.                  Because economics based on trade and commerce was needed in order to develop the country and keep dominance in the Mediterranean.

14.2.                  Furthermore, the development of economy and the expansion of trade had to be carried out with focus on the social justice and charity towards the poor and the needy

  1. What happen in the period going from Charles Martel to the Black Death?

15.1.                  Charles Martel was the savior of Christianity and the creator of the Feudalism. Feudalism is a term originated from Feuds or the land zone given to the Warlord as reward or as sign of alliance from the King.

15.2.                  The feudal lord could sub-rent his land to master farmer who could also work for neighboring feudal lords.

15.3.                  The master farmer would later sub-rent the land to farmers in exchange of money or an established quantity of produce that the master farmer could sell for raising money to pay the feudal lord.

15.4.                  Feudalism created a very unequal and unjust society and encouraged slavery. The Black Death or Black Plague was one of the most devastating pandemics in human history, resulting in the deaths of an estimated 75 to 200 million people and peaking in Europe in the years 1346–53.

15.5.                  Spreading throughout the Mediterranean and Europe, the Black Death is estimated to have killed 30–60% of Europe’s total population.[7] In total, the plague reduced the world population from an estimated 450 million down to 350–375 million in the 14th century.

15.6.                  The world population as a whole did not recover to pre-plague levels until the 17th century.

  1. Can you tell about the Renaissance period? And why economics started to be considered a discipline at universities?

16.1.                  The increased contact with the Islamic world in Muslim-dominated Spain and Sicily, the Crusades, the Reconquista, as well as increased contact with Byzantium, allowed Europeans to seek and translate the works of Hellenic and Islamic philosophers and scientists, especially the works of Aristotle.

16.2.                  Several translations were made of Euclid but no true commentary was written until the middle of the 13th century.

16.3.                  The development of medieval universities allowed them to aid materially in the translation and propagation of these texts and started a new infrastructure which was needed for scientific communities.

16.4.                  In fact, the European university put many of these texts at the center of its curriculum, with the result that the “medieval university laid far greater emphasis on science than does its modern counterpart and descendent.”

16.5.                  At the beginning of the 13th century there were reasonably accurate Latin translations of the main ancient Greek scientific works.

  1. Who was Nicolas Oresme and what is the theory of Money

17.1.                  With his Treatise on the origin, nature, law, and alterations of money (De origine, natura, jure et mutationibus monetarum), one of the earliest manuscripts devoted to an economic matter,

17.2.                  Oresme brings an interesting insight on the medieval conception of money. Money is basically a mean of exchange and cannot have a stock value because value of goods and products and economic situations evolve over the time causing money to gain or lose value.

17.3.                  Debasement or coining money by reducing the content of gold and silver is considered totally dishonest. And because the only person with the authority to do so was the King then he was creating mistrust in the currency and market crisis.

17.4.                  The King had the responsibility to defend the currency and to keep the market’s trust on the value of the currency. By reducing the content of precious metal in the coins the value of the currency was considered lower.

17.5.                  The King could not pass a law claiming that a clipped coin had the same value of pure original coin because the market operator would not value it the same.

17.6.                  Traders and merchants would export undervalued money to other countries causing the failure of the reasons why the King debased the currency which was to create profit for the internal economy.

  1. What is the importance of the Renaissance? And what we intend with Modern View?
    • 1. The Renaissance is a period in European history, from the 14th to the 17th century, regarded as the cultural bridge between the middle Ages and modern history.
    • 2. It started as a cultural movement in Italy in the Late Medieval period and later spread to the rest of Europe, marking the beginning of the Early Modern Age.
    • 3. The intellectual basis of the Renaissance was its own invented version of humanism, derived from the rediscovery of classical Greek philosophy, such as that of Protagoras, who said that “Man is the measure of all things.”
    • 4. This new thinking became manifest in art, architecture, politics, science and literature.
    • 5. As a cultural movement, the Renaissance encompassed innovative flowering of Latin and vernacular literatures, beginning with the 14th-century resurgence of learning
  1. Tell me about the reformation. What do you know?

19.1.                  The Protestant Reformation, often referred to simply as the Reformation (from Latin reformatio, lit. “restoration, renewal”) was a schism from the Roman Catholic Church initiated by Martin Luther and continued by John Calvin, Huldrych Zwingli, and other early Protestant Reformers in 16th century Europe.

19.2.                  The Roman Catholic Church responded with a Counter-Reformation initiated by the Council of Trent. Much work in battling Protestantism was done by the well-organized new order of the Jesuits. In general, Northern Europe, with the exception of most of Ireland, came under the influence of Protestantism. Southern Europe remained Roman Catholic, while Central Europe was a site of a fierce conflict, culminating in the Thirty Years’ War, which left it devastated.

  1. What we intend with the concept of European Nation State?
  • 1. A significant early use of the term nation, as natio, occurred at mediaeval universities to describe the colleagues in a college or students, above all at the University of Paris, who were all born within a pays, spoke the same language and expected to be ruled by their own familiar law.
  • 2. The University of Prague adopted the division of students into nationes: from its opening in 1349 the studium generale which consisted of Bohemian, Bavarian, Saxon and Silesian nations.
  • 3. In a similar way, the nationes were segregated by the Knights Hospitaller of Jerusalem, who maintained at Rhodes the hostels from which they took their name “where foreigners eat and have their places of meeting, each nation apart from the others, and a Knight has charge of each one of these hostels, and provides for the necessities of the inmates according to their religion”, as the Spanish traveler Pedro Tafur noted in 1436.
  1. What is Mercantilism?

21.1.                  The Mercantilism was not a real and pure economic science in the proper meaning of the term. It consisted, merely, of a wide range of philosophical ideas focused to the study of economics and related matters.

  1. What is power politics during Mercantilism?

22.1.                   First of all, Mercantilism is based on Power Politics, which established that a nation, with economic or political or military supremacy, had the right to control or rule any other inferior nation. In the 15th century, the wealth of a nation was measured on gold reserve and gold coins, militarism and politics of hegemony.

  1. What does it mean for the Mercantilists that the wealth of a nation is a given stock?

23.1.                   For the theorists of the Mercantilism, the wealth of a nation is like a given stock as value. In other words, the wealth of a nation is limited by the economic resources within the territorial and political borders of a nation. However, the wealth of a nation could be increased through exports or foreign trade. Logically, if a country exports more than what it does import then the trade produces a plus value which generates wealth and prosperity.

  1. What is the concept of trade balance during the mercantilism?

24.1.                   It is necessary to keep the trade balance on the positive side in order to ensure constant plus value. In other words, it was important to keep imports lower against the exports.

24.2.                   Positive trade balance, which means keeping the volume of exports higher than imports, generates external demands for home made products, creates and stimulates greater production, higher employment and ensure constant trade and higher currency value.

  1. What is protectionism for the Mercantilists?

25.1.                   In order to protect export and internal production, the theorists of Mercantilism suggested the implementation of a protective system of trade able to decrease or limit the export duties on home made products for international trade and an increase on tariffs for all imported products. The purpose was to protect the internal

  1. What are the main critics of David Hume to the Mercantilism?

26.1.                   Trade surplus means intense flows of precious metals into the internal economy

26.2.                   Increase of prices of common goods of consumption (what we call today CPI or Consumer Price Index) causes high inflation

26.3.                   Decrease of exports because when an economy has reached a general wealthy status and there is no urgent need for further growth then there is a general tendency towards a lower production and a reduce of trade volume

26.4.                   Real adjustment of the national commercial banks towards the new needs of the market and foreign trade

  1. Can you explain the Equation of David Hume higher currency value = higher prices?

27.1.                   David Hume is, together with Bodin and Locke, the creator of the relation between currency ration and price ratio

27.2.                   Though the forms of protectionism practices during the Mercantilism were not as strict as today’s, however, David Hume sustained that a constantly increasing positive trade balance was not beneficial for the internal economy.

27.3.                   The reason was, according to Hume, that a greater incoming quantity of precious metals (gold, silver, bronze and others) will cause an increase of prices in the market.

27.4.                 At every increase of price there is an increase of the point of equilibrium of aggregate demand and aggregate offer upwards.

  1. can you introduce to me Adam Smith?

28.1.                 Adam Smith (1723-1790) was not an economist or a scholar of finance. He was a philosopher mainly concerned with the study of ethics and the concepts of morality and he was professor at the University of Glasgow in Scotland. However, during his studies and teachings, complemented with hundreds of articles and essays, he found himself involved into the analysis of the economic situation of his times

  1. Who are the other important thinkers of the Classic School of Economics?

29.1.                 Adam Smith

29.2.                 David Ricardo

29.3.                 Thomas Malthus

29.4.                 Jean Baptist Say

  1. How can you define the theories of the Classic School of Economics?

30.1.                 All the theories expressed by the classic school of economics, from 1776 to 1870, are called and defined as macroeconomic theories. In other words, to put it simply, the classic economics looks and analyzes the interaction between social classes, the production of the wealth of nations, the capital and use of it for boosting economic development, the socio-political and economic factors determining the prosperity and fortune of a nation compared to others.

  1. Why the approach to Economics of Adam Smith is called Historic Deductive?

31.1.                 Adam Smith is the first thinker able and willing to use an approach to the study of economics that can be defined historic deductive. It means that he does formulate his economic theories after careful observation of historic facts before and during his lifetime. The theories of Adam Smith can be understood only by analyzing England and the European economy of Adam smith’s time period. Adam smith understands that is arrived the moment of using the theory of liberalism in economy.

  1. In some cases, Adam Smith is in favor of the Government’s Hand? Why?

32.1.                 In some cases, Adam Smith is in favor of the “Government Hand” and the input of the Government into the market system. For example, he did agree that the government was responsible for the public education, for the social security and the control over the police and the army, the legislation, the public infrastructure and the support of the trade initiatives.

  1. What is Monetarism or Cartalism for Adam Smith?

33.1.                   Adam Smith can be clearly defined as the pioneer of the theory called “Monetarism’ or also known as “Cartalism”. In his masterpiece, he wrote: “a ruler who has the duty and task to establish that taxes must be paid in a specific currency of his choice will add value to that currency because the terms and conditions of printing that currency belong exclusively to the ruler and his free will….”

  1. Why the lack of Monetarist policies contributed to the decline of the Roman Empire?

34.1.                   One of the causes accelerating the decline of the Roman Empire was that Rome never forced the conquered territories to use only Roman coins and no other currencies. Rome was more interested that traders within the Empire did trade with valuable currencies minted with precious materials. What Rome did not understand was that it was the duty of Rome to print currency for the Empire and that the currency produced had to be charged with interests. The traders, during the Empire, often decided to barter their products and goods to avoid the use of the Imperial currencies. In this way, the Imperial tax collector has difficulties in tax collections.

  1. What are the main ideas of Thomas Malthus?

35.1.                  Malthus’s Doctrine Of Population

35.2.                  Survival Salary

35.3.                  Critics To The Law Of Say

  1. Why Malthus is talking about survival salary?

36.1.                  According to Malthus, a salary cannot increase beyond a certain limit therefore it is called survival salary. In other words, the salary must be fixed or increased in order to be just sufficient and adequate for the primary necessities of life called primary levels

  1. What is the Law of Jean Baptiste Say?

37.1.                  Law of Say or Principle of Say establishes that “The production of goods and services is sufficient and adequate for creating a suitable purchasing power able to absorb all of them in the market to ideal prices”.

37.2.                  In simple words, the Law or Principle of Say backs the theory that it is the offer that creates the demand, Furthermore, this Principle claims that every kind of production generates its own demand and, consequentially, anything that is produced is sold to and bought in the market.

  1. What are the main points of David Ricardo?

38.1.                  Income Distribution Or Resources Allocation

38.2.                  Survival Salary

38.3.                  Theory Of Work Value And Value As Stock

38.4.                  Theory Of Decreasing Profit

38.5.                  Capitalism Tends To A Condition Of Stability Or Permanency

38.6.                  Law Or Principal Of Say

  1. What are the three major social classes according to Ricardo

39.1.                  the capitalists or investors,

39.2.                  the employees or workers

39.3.                  and the land owners

  1. Does Ricardo agree with the Law of Say?

40.1.                   He does a critic to the Law or Principle of Say basically reducing the theory that all produced goods and services are absorbed by the market because when there is an offer there must be a demand. For him, the Law or Principle of Say does work for some products but not for all of them.

  1. Can you explain the theory of Capitalistic stability in Ricardo?

41.1.                   Ricardo launches a new idea that becomes central to the economic analysis which is that Capitalism tends to reach a stage of stability or permanence in the long term. It means that once Capitalism has reached its peak it does not change but settle down and stabilize itself and the economy.

  1. What are the three tools used by Karl Marx to destroy the theory of Capitalism?

42.1.                  The method

42.2.                  The analysis

42.3.                  The politics

  1. What are four main concepts of the Marxist theory?

43.1.                  Social Classes

43.2.                  Capitalism Characterized By Instability And Destined To Disappear

43.3.                  Industrial Army Of Reserves Or Workers And Unemployed Masses

43.4.                  Theory Of Work-value As Theory Of Exploitation

  1. In Marx’s opinion, what are the social classes? And why does he think like that?

44.1.                   In Marx’s opinion, the society is divided in social classes: the class owning the means of production (capitalists, business men, investors) and the class without means of production (or the working class or workers or the masses of workers).

  1. Can you explain the Marxist theory of unemployment of masses?

45.1.                   Marx feel the presence, in his analysis of the social classes, of an industrial army called masses of reserve workers. With this term, Marx intends the masses of unemployed workers able to contribute to production but desperately looking for job. (See slide 73 from neoclassic to today economics.pptx

45.2.                   For Marx, the higher the unemployment rate the lower the average salary. Therefore, Marx is opposed to the theory of survival salary of Malthus. In other words, Marx affirms that Capitalism has the reason and the goal of creating an army of masses of unemployed workers in order to keep down the average salary of the worker (see slide 74 from neoclassic to today economics.pptx)

  1. What is the equation used by Marx to explain the Capitalistic System?

46.1.                   The theory of work value of Marx is based on the exploitation of the masses of workers. According to Marx, the Capitalist economy can be defined with the following equation:

46.2.                   (see slide 75 from neoclassic to today economics.pptx)

  1. What is the optimal standard of unemployment for industrial economies?

47.1.                   The unemployment rates of the industrial economies, according to the theorists of Capitalism, must be maintained at the optimal standards of around 8-9% of the working population or employable population. The benefits of a controlled unemployment, through socio-economic factors, allows to keep the levels of salary low.

47.2.                   (see slide 77 from neoclassic to today economics.pptx)

  1. Can you explain the relation between Marx’s Equation of Capitalism and the Equation of Plus Value

48.1.                   (see slide 79 from neoclassic to today economics.pptx)

48.2.                   (see slide 80 from neoclassic to today economics.pptx)

  1. What are the other main concepts of Marxism?

49.1.                   Origins Of Economic Crisis

49.2.                   Crisis Of Realization Of Profit

49.3.                   1. Crisis Of Disequilibrium

49.4.                   2. Crisis Of Under Consumption (Scarcity Of AD)

49.5.                   Crisis By Tendential Fall Of Profit (Economic Depression Of 1800)

  1. What are the conclusions of Marx on the Capitalism system?

50.1.                   With the Capitalism model, this equation is completely changed and reformed.

50.2.                   The wealth of a Capitalist, in the Marxist equation is the capital.

50.3.                   The product or good becomes a necessary mean to acquire more money which is the ultimate goal of the trade transaction of the Capitalist.

50.4.                   Thus, the economic system is not anymore based on the good or service as mean of trade but on the money or capital.

  1. What is the crisis of the realization of profit?

51.1.                   The Crisis of Realization of Profit can be defined in two different types of crisis. In the Crisis of Under-Consumption there is a disastrous reduction of the aggregate demand of consumption in relation with the aggregate offer of production. Or in other words, the consumers absorb, generally, the offer of goods and service in a way much below the curve of offer. Therefore, the producers find themselves in a phase of overproduction towards an underperforming aggregate demand.

  1. What is the crisis of under consumption?

52.1.                   The Crisis of Under-Consumption creates and determines the Crisis of Realization of Profit. In other words, the market economy faces a terrible and gigantic imbalance between the amount of capital investments done with the idea of realizing fast and immediate profit and the unexpected low aggregate demand affecting all the production lines.

  1. What is the crisis of disequilibrium?

53.1.                   The Crisis of Disequilibrium causes the increase of the unemployment rate because of the elevated number of job losses. However, the capitalist may opt, the short term, towards a reduction of salary with two main objectives: reduce the direct cost of production by forcing the workforce to accept reduced retribution terms and motivating the unsatisfied employees to voluntary resign.

  1. What is special about Neoclassical Marginalism?

54.1.                   After Marx, there is the arrival of the Neoclassical Marginalists. The Marginalist current of thought born around the 1870 thus just after Marx as answer to the Marxism.

54.2.                   The Neoclassical Marginalists follow a reduced understanding and view of the economy and they are the creator of what it can be called Microeconomics.

54.3.                  With the Neoclassical Marginalists, Macroeconomics loses importance and the interest of most of the economists is focused on the deeper understanding of microeconomics concepts of economy

  1. What are the main points of the Neoclassical Marginalism

55.1.                  No More Social Classes But Economic Agents

55.2.                  Theory Of Utility Value

55.3.                  Compensation And Remuneration Of The Factors Of Production (Labor, Land, Capital) According To The Marginal Productivity

  1. Can you explain the concept of Utility Value in Neoclassical Marginalism?

56.1.                  The value of utility is not the same for everyone. It is very subjective.

56.2.                  Therefore, the subjective definition or perception of utility determines the value of a product and its demand in the market.

56.3.                  The higher the value of perceived utility, the higher its consumption and the higher its offer.

56.4.                  When the demand is higher the prices tends to be higher as a mean to control the demand curve.

  1. Who is Sraffa and what was his main idea on economics?

57.1.                   An Italian economist, Pietro Sraffa (1898-1983) completely destroyed the Neoclassical Theory. Pietro Sraffa served as Professor of Economics at the University of Cambridge and his book Production of Commodities by Means of Commodities is taken as founding stone of the Neo Ricardian School of Economics.

  1. What is the Cambridge Capital Controversy?

58.1.                  See slide 98 of from neoclassic to today economics.pptx

  1. What was the main thinking of Walras?

59.1.                   He sustained that within the market there is an interaction among economic agents able to determine a general equilibrium as a natural factor of stability. In the market, there are no surplus of demand and/or offer because both of them self-regulate themselves through interaction.

  1. What was the main idea of Marshall that after influenced Keynes?

60.1.                   Alfred Marshall (1842 – 1924), who was the teacher of John Maynard Keynes, was convinced about the existence of a general economic equilibrium or balance among the factors of productions (capital, labor, land). But in the market of goods and services, the point of equilibrium is partial because determined by other socio-economic factors impossible to forecast or determine.

  1. What are the main points of Keynes’s economic theory?

61.1.                   Saving Does Not Depends On The Interest Rate

61.2.                   Consumption Depends On The Income

61.3.                   Income Is Determined By The Investments

61.4.                   Investments Are Determined By “Animal Spirits” And By The Marginal Efficiency Of The Capital

  1. Why Keynes thinks that low aggregate demand is very important?

62.1.                   He instead argued that aggregate demand determined the overall level of economic activity and that inadequate aggregate demand could lead to prolonged periods of high unemployment.

62.2.                   See slide 103 of from neoclassic to today economics.pptx

  1. Why for Keynes state intervention is important?

63.1.                  According to Keynesian economics, state intervention was necessary to moderate “boom and bust” cycles of economic activity. Keynes advocated the use of fiscal and monetary and policies to mitigate the adverse effects of economic recessions and depressions

63.2.                   See slide 104 of from neoclassic to today economics.pptx

  1. How Keynes consider the salary’s relation to spending and aggregate demand?

64.1.                   According to Keynes, the consumer spends accordingly to the available income or net income after all tax deductions and basic living expenses are cut from the salary or retribution for their job. Therefore, for Keynes, it was not correct to think that because consumers has good salary then the aggregate demand must also present high levels of consumption.

64.2.                   See slide 105 of from neoclassic to today economics.pptx

  1. Why better technology and knowledge can be linked to salary and general economic development?

65.1.                   The income of the employees depends also from the level of investments of capitals in technology and progress.

65.2.                   The higher the technology used in production the higher the knowledge and professionalism required in the workforce.

65.3.                   A better educated, knowledgeable and trained workforce would have to paid higher salary and offered better contractual terms and conditions

65.4.                   See slide 106 of from neoclassic to today economics.pptx

  1. How the nation’s GDP can be affected by better knowledge and education?

66.1.                   For Keynes, if a country does invest massively in innovation and research, in the professional knowledge, in the quality of education and in scientific and technological development, the workforce generated will be professionally prepared to carry out better jobs requiring better knowledge. When the consumers have higher salary, the also possess higher available income to spend in the market pushing upwards the aggregate demand.

66.2.                   See slide 107 of from neoclassic to today economics.pptx

  1. What is Marginal Efficiency of Capital for Keynes? Give an example

67.1.                   It is important also the marginal efficiency of capital. The higher the efficiency the more prosperous the economy. The marginal efficiency of capital can be defined as level of expectations of the capitalists and investors.

67.2.                   See slide 109-110 of from neoclassic to today economics.pptx

  1. What are other important points of Keynes?

68.1.                   Other important points of John Maynard Keynes are:

68.1.1.   Equilibrium of under employment

68.1.2.   Deficit of Aggregate Demand = increase of public expenditure

68.1.3.   Keynesian multiplier or factor of multiplication: investment of Capital creates necessary income for the repayment of the credit used for the investment

  1. How salary flexibility can affect employment?

69.1.                   The classical and neoclassical economists agreed, apart Marx, on the concept that salary flexibility creates employment and a marginal voluntary unemployment caused by those employees not agreeable to flexible salary.

69.2.                   In other words, there is demand for employment superior to the job offer. Therefore, there is a deficit between those willing to be employed but unable to find employment because there is not enough job offer from capitalists and investors.

69.3.                   See slide 112 of from neoclassic to today economics.pptx

  1. What are the consequences of high unemployment levels in an economic system?

70.1.                   A higher level of unemployment does contributes towards few changes in the economic system, like the followings:

70.1.1.   Reduction of the salary level

70.1.2.   Reduction of the available income and the consumption in the market with reduction of the aggregate demand

70.1.3.   Increase of unemployment causes also an increase of consumers with zero income

70.1.4.   A reduction of consumption causes a decrease of the aggregate demand. With a lower aggregate demand there is a decrease of production because producers decide to cut down the offer to avoid production surplus and increase of cost of production, reduction of profit and financial losses.

70.1.5.   The higher the unemployment rate within the employable population the higher will necessarily be the public expenditure in social amortizations in support of low income family groups and social classes.

70.1.6.   Therefore, for Keynes, was important that, during an economic crisis, the government entered the economic system with corrective measures and goals for stimulating the recovery of the production and labor markets.

70.1.7.   See slide 114 of from neoclassic to today economics.pptx

  1. Can you explain the concept of the Keynesian multiplier?

71.1.                   The concept of the Keynesian multiplier is very simple. If the government (public sector) spends a Dollar (in order to generate production and investment and, directly, generate employment and, thus, aggregate demand) the return of investment will be greater of a Dollar and in this way it is possible to repay the credit of investment.

71.1.1.   See slide 115 of from neoclassic to today economics.pptx

  1. What are the main points of the Neoliberalism?

72.1.                   Neoliberalism (neo-liberalism) refers primarily to the 20th century resurgence of 19th century ideas associated with laisse-faire economic liberalization. These include extensive economic liberalization policies such as:

72.1.1.   Privatization

72.1.2.   Fiscal austerity

72.1.3.   Deregulation

72.1.4.   Free trade

72.1.5.   Reduction in government spending in order to enhance in order to enhance the role of the private sector in the economy.

  1. What happened in the 1960s in Chile?

73.1.                   In the 1960s, usage of the term “neoliberal” heavily declined. When the term was reintroduced in the 1980s in connection with Augusto Pinochet’s economic reforms in Chile’s, the usage of the term had shifted. It had not only become a term with negative connotations employed principally by critics of market reform, but it also had shifted in meaning from a moderate form of liberalism to a more radical and laissez-faire capitalist set of ideas.

73.2.                   According to Chilean economist Alejandro Foxley, by the end of Pinochet’s reign around 44% of Chilean families were living below the poverty line. According to Klien, by the late 1980s the economy had stabilized and was growing, but around 45% of the population had fallen into poverty while the wealthiest 10% saw their incomes rise by 83%. In 1990 the military dictatorship ended.

  1. What is the concept of Xiao kang in the recent economic history of China?

74.1.                   See slide 124-130 of from neoclassic to today economics.pptx

  1. What happened in England with the premierships of Tatcher, Major and Blair?

75.1.                   See slide 130-133 of from neoclassic to today economics.pptx

  1. What were the different economic neoliberalist policies of Reagan and Bill Clinton? And why these policies have contributed to the loss of the world’s economic leadership of U.S and the shifting on balance from the West to the East?

76.1.                   See slide 134-135 of from neoclassic to today economics.pptx

  1. What are the main ideas of Neo Monetarism?

77.1.                   The monetarists had the strong opinion that the economic system was stable and balanced.

77.2.                   The government can use the crowding out (increase of public spending) through a bigger fiscal pressure by charging the business sector with higher taxes.

77.3.                   In this way, the business sector sees potential capital investment taken away by the government through tax collection.

77.4.                   With new income from tax collection, the government, theoretically, should increase the public spending to support the economy.

  1. What are the main points of Monetarism?

78.1.                   The Economic System Is Stable And Balanced

78.2.                   Crowding Out (Displacement)

78.3.                   Public Expenditures Can Produce Only Short Term Changes But In The Long Term There Are Inflationary Effects

78.4.                   Minimization Of The State Policies On The Market System

  1. What are the economic differences between Communism, Socialism and Capitalism?

79.1.                   See slide 138 of from neoclassic to today economics.pptx

  1. Why Keynes is not in favor of increased public spending?

80.1.                   Keynes opposes the increase of public spending if that comes as fruit of higher and heavier fiscal pressure on the business sector because

80.1.1.   the production of goods and services will decrease for lack or scarcity of capital investments on new technology and research but

80.1.2.   will increase unemployment, costs of supplies of production and prices of goods and services:

80.1.3.   While there will be a dramatic reduction of the purchasing power of consumers and the aggregate demand with immediate higher rates of inflation.

80.1.4.   Logically, with a higher inflation, the purchasing power of consumers is reduced and the business sector suffers while forced to reduce production and cut jobs.

  1. Can you explain with more insight the meaning of Monetarism?

81.1.                   Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation. Monetarist theory asserts that variations in the money supply have major influences on national output in the short run and on price levels over longer periods. Monetarists assert that the objectives of monetary policy are best met by targeting the growth rate of the money supply rather than by engaging in discretionary monetary policy

  1. Can you explain Friedman’s Theory?

82.1.                   See slide 141-144 of from neoclassic to today economics.pptx

  1. What is the value stability of currency in Keynes?

83.1.                  See slide 146 of from neoclassic to today economics.pptx

  1. What is the fixed monetary rule of Friedman?

85.1.                   See slide 147 of from neoclassic to today economics.pptx

  1. How can we define the theories of Monetarism and Neoliberalism?

86.1.                   See slide 153 of from neoclassic to today economics.pptx

  1. Why lark Marx was right?

87.1.                   In other words, Karl Marx was right when, in his stubborn but lucid critics to capitalism, he sustained firmly that capitalism does represent the ultimate economic interests and political dominance of elitarian social classes whose ultimate goals were the submission and exploitation of the masses.

87.2.                   See slide 155 of from neoclassic to today economics.pptx

  1. What are the basic ideas of the New Classical Macroeconomics?

88.1.                   This new school of thought supported the idea that it is perfectly natural to have complete trust in the economic forces or agents of being able to find equilibrium and balance.

88.2.                   The government should not intervene in the market system because any attempt of controlling the market may cause only inflation and various inflationary consequences

  1. What is the neutrality of currency?

89.1.                   See slide 157 of from neoclassic to today economics.pptx

  1. What were the major points of the New Classical Macroeconomics?

90.1.                   Major Trust In The Balancing Forces Of The Economic System

90.2.                   Rational Expectations

90.3.                   State Actions Does Not Cause Changes Not In The Short Or Long Term

90.4.                   Neutralism Of The Currency And Of The Political Economics

90.5.                   See slide 159-161 of from neoclassic to today economics.pptx

  1. Can you explain the concept of Productivity Wedge?

91.1.                   See slide 162 of from neoclassic to today economics.pptx

  1. Can you explain the concept of Capital Wedge?

92.1.                   See slide 163 of from neoclassic to today economics.pptx

  1. Can you explain the concept of Labor Wedge?

93.1.                   See slide 164 of from neoclassic to today economics.pptx

  1. Can you explain the Eternal Market Balance?

94.1.                   See slide 165 of from neoclassic to today economics.pptx

  1. Why prices and wages go to different speed in the market and in relation to the equilibrium of offer and demand?

95.1.                   See slide 169 of from neoclassic to today economics.pptx

  1. What happen with the arrival of the New Liberalism?

96.1.                   In the 1980s, the public intervention was considered necessary if the purpose was to avoid a terrible global economic crisis (Reagan, Thatcher, and Pinochet).

96.2.                   In the 1990s, the economy is not anymore regulated through the use of fiscal policies, but through the use of monetarist policies based on the flexibility and fluctuation of interest rates.

  1. What are the main concepts of the New Liberalism?

97.1.                   Monetary policies replace fiscal policies

97.2.                   Low interest rates to initiate accumulation of financial capital

97.3.                   Money manager capitalism

97.4.                   Precariat of Labor

97.5.                   Full under employment (not full unemployment)

97.6.                   Households consumption as debt

  1. What did happen in the market system when the banks decreased the interests on capital investment?

98.1.                   See slide 178 of from neoclassic to today economics.pptx

  1. Where is the financial risk in the stock market?

99.1.                   See slide 179 of from neoclassic to today economics.pptx

  1. What is the equation of financial capitalism?

100.1.               See slide 180 of from neoclassic to today economics.pptx

  1. What is the difference between GDP or real market economy and financial market’s money transactions and volume?

101.1.               See slide 181-182 of from neoclassic to today economics.pptx

  1. What are derivatives and why they carry high profit but also high risks?

102.1.               See slide 183-184 of from neoclassic to today economics.pptx

  1. How stock bubbles and financial crisis due to capital investments over flooding the share markets may lead to instability thus originate or cause war conflicts?

103.1.               See slide 185-192 of from neoclassic to today economics.pptx

  1. What are some important conflicts from 1970s until today which are basically generated by financial crisis?

104.1.               Other cases to be cited could be the colonialism of Western powers developed during the Mercantilism;

104.1.1.                     the war in the 1970s between the Arab league and Israel (the War of Sinai) caused by the Oil Crisis of the early 1970s;

104.1.2.                     the first War to Iraq waged by the U.S. and an International coalition in the 1990s due to the Iraqis invasion of Kuwait;

104.1.3.                     and again the War to the Axis of Terror after the 9-11 terroristic attack was conducted for the control over the oil reserves and the precious materials to be mined in Iraq;

104.1.4.                     The Arab springs and the arrival of ISIS or ISIL are the results of U.S. wrong foreign policies and attempts to control Sub-Saharan and North-African countries.

  1. Can you explain the rise of China in the last twenty years? What are the global economic strategies of China? Why China soft diplomacy and Asian pragmatism has been so successful for the rapid economic development of China?

105.1.               See slide 196-211 of from neoclassic to today economics.pptx


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