Homework 14 (Due Tuesday April 16th in class)

Students, 

Print out the Module 84 PowerPoint presentation and read it carefully, especially slide # 3. 

In addition, add the following to your Module 84 lecture notes:

Adam Smith (1723-1790), the father of modern macroeconomics is associated with Classical macroeconomics. He was very much pro-capitalism and anti-government and wrote the famous book called, "The Wealth of Nations." David Ricardo (1772-1823) who studied under Adam Smith is also associated with the Classical school of  thought. We get from him the importance of international trade, in particular absolute vs. comparative advantage. 

John M. Keynes (1883-1946) is associated with Keynesian macroeconomics. He was very much pro-government and was a strong proponent of fiscal policy to help stabilize the economy. In order to deal with the Great Depression, he suggested spending our way out of the depression through increases in G and GT. What we get from him is the idea of sticky wages and prices, and the model of SRME and LRME. 

Milton Friedman (1912-2006) is associated with Monetarism. He was very much pro-capitalism and a strong proponent of monetary policy to help stabilize the economy. He often quoted Adam Smith and was in favor of having the central bank be totally independent from the federal government. 

Paul Krugman, Janet Yellen and others are associated with the Modern Consensus today which is a healthy mix of both fiscal and monetary policy to help stabilize the economy. 

 

For Homework: Analyze the following quotes by Adam Smith who was a pioneer of political economy. What is he trying to say in each? Do you agree or disagree? Why? 

1. "Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer." Adam Smith
2. "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 own interest." Adam Smith
3. "The real and effectual discipline which is exercised over a workman is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence." Adam Smith
4. "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable." Adam Smith
5. "Labour was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased." Adam Smith
6. "No complaint... is more common than that of a scarcity of money." Adam Smith
7. "What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?" Adam Smith
8. "The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals." Adam Smith
9. What is your favorite quote by Adam Smith? Explain why in detail.