CHAPTER 2

3. Why are mercantilists sometimes referred to as bullionists? Incorporate each of the

following in your answer: exports, imports, colonies, war, tariffs, statechartered
monopolies, colonialism, large populations, free internal trade.
4. Why did the mercantilists favor large populations and low wages? How does the
mercantilists’ position on this issue relate to income and substitution effects of a wage
rate increase? What advantages did Petty ascribe to large populations
7. Mercantilists realized that (a) a surplus of exports would cause gold and silver to flow
in from other countries, and (b) increases in the stock of money can drive up a
nation’s prices. Are these outcomes compatible with one another in the long run?
8. On what basis did the mercantilist Thomas Mun defend the practice of shipping some
gold abroad?

CHAPTER 3
2. When did the physiocratic school begin? When did it end? Why was the school so
short-lived?
3. In what respects was the physiocratic school a reaction to mercantilism? Why did it
develop in France?
4. Briefly summarize the key elements of Quesnay’s Tableau Economique. In what way
did this table foreshadow the contemporary circular flow diagram and national
income accounting? Could one table be derived from the other? Explain.
7. What sector of the economy did the physiocrats emphasize? Why? What were the
implications for tax policy?
8. Discuss the major shortcomings and contributions of physiocratic thought.

CHAPTER 4

2. What relationship, if any, do you see between the scientific revolution associated with
Newton and others and Hume’s most significant contribution to economics? Explain.
3. Compare the list of major tenets of the classical school with those of the physiocratic
school (Chapter 3). Which are similar? Which are dissimilar? Based on this
comparison, would you characterize the physiocrats as forerunners to the classical
school? Explain.
8. Use the following mathematical identity (the equation of exchange) to explainHume’s
price specie-flow mechanism: MV = PT, where M = the stock of money, V = velocity,
P = price level, and T = quantity of goods transacted. Assume that V and T are
constant.
9. Discuss: Classical economists viewed economic laws as immutable, not to be
tampered with or thwarted. They and their followers could not understand that
economic laws, which are generalizations about tendencies, can be curbed, overcome,
or redirected—that people can control economic life.

CHAPTER 5

1. Briefly identify and state the significance of each of the following to the history of
economic thought: the Enlightenment, The Theory of Moral Sentiments, The Wealth
of Nations, invisible hand, division of labor, law of absolute advantage in
international trade, water-diamond paradox, labor cost theory of value, labor
commanded theory of value, wages fund doctrine, equalizing wage differences,
widening of the market, and capital accumulation.
3. What is the general theme of Smith’s Theory of Moral Sentiments? How does it relate
to his Wealth of Nations?
4. How does the title of Smith’s treatise on economics relate to his criticism of
mercantilism? How does Smith define the wealth of a nation? What factors interact to
cause increases in a nation’s wealth?
8. What, according to Smith, determines exchange value in a primitive economy? What
determines exchange value in an advanced economy? Why did Smith use “labor
commanded” rather than simply “money commanded” as a measure of the value of a
good?
11. What is an efficiency wage? What role do these wages play in Smith’s theory of
economic development? How might efficiency wages contribute to high rates of
frictional unemployment and to recessions, according to modern efficiency wage
theorists?

CHAPTER 6

2. Compare and contrast the implication for wages of the theory of population presented
by Thomas Malthus with the wage theory provided by Adam Smith (Chapter 5).
6. What, according to Malthus, are market gluts? How and why do they come about?
How can they be avoided? What is the significance of the corn laws to all of this?
7. Explain the following: Although the Malthusian theory of gluts was the first attempt
to explain unemployment, it was not a theory of business cycles.

CHAPTER 7

2. Relate Ricardo’s position on the corn laws to his (a) theory of distribution and (b)
theory of comparative costs.
 3. Compare and contrast the views of Ricardo and Malthus on each of the following
topics: (a) corn laws, (b) subsistence wage, and (c) market gluts.
6. How did Ricardo’s labor theory for an advanced economy differ from Smith’s? Use a
contemporary supply and demand graph to demonstrate Ricardo’s notion that an
increase in product demand will not increase the value (price) of reproducible goods
that are produced at a constant average cost. Hint: Remember from previous courses
that a product supply curve is a marginal cost curve.
9. Use Hume’s price specie-flow mechanism to explain why Ricardo thought that
increases in nominal wages paid to workers would reduce firms’ profits.

CHAPTER 8

5. What is the law of markets? Identify which of the following people supported the
notion and those who rejected it: Smith, James Mill, Say, Malthus, Ricardo, Senior,
and John Stuart Mill.

CHAPTER 10

2. Explain Marx’s theory of history, relating it to the earlier ideas of Hegel and
Feuerbach.
3. Explain each of these Marxian equations, relating them to his analysis of the “law of
motion” of capitalism:
a) Value=c + v+ s
b) s ’=s /v
c) Q=c/(c +v )
d) p' =s ' (1−Q)
5. If workers are paid the value of their labor power, as Marx contended, then in what
sense are they exploited?

CHAPTER 11

1. Briefly identify and state the significance of each of the following to the history of
economic thought: the Holy Alliance of 1815, List, infant industry argument, Roscher,
Schmoller, Methodenstreit, Weber, Protestant ethic, R. Tawney, Sombart, and Socialists of
the Chair.