Classical school

Question 1

Main ideas of school

5 key points

Answer 1

1. Limited govt. intervention
2. Self-interest behavior - profit motive
3. Harmony of interests
4. All economic resources/activities are important
5. Laws: comparative advantage, diminishing returns, labor theory of value

Question 2

Adam Smith

8 key points

Answer 2

1. Labor theory of value ( natural-market price, LR, price theory)
2. Wages, Profits, Rents & the invisible hand - harmony of interests
3. Free competition assumptions
4. Competition > invisible hand > but inequalities arise if with market alone
5. International trade - no policy intervention
6. Role of government (3)
7. Role of money - unproductive, dead stock
8. Economic growth - Capital accumulation (wage fund theory, division of labor )

Question 3

Malthus

4 key points

Answer 3

1. Population growth theory
2. Mechanism (economic growth -> population growth -> food
   shortage -> more people living in poverty -> starvation and fewer births ->
   balance population and food supply)
3. Market glut theory
4. Policy - poor laws, corn laws
   - Preventive and positive checks

Question 4

Riccardo

4 key points

Answer 4

1. Theory of rent
2. International trade
3. Labor theory of value
4. Policy conflict with Malthus
5. Theories (3)

Question 5

Mill

Answer 5

1. Price theory evolution & 3 formations

2. Theory of wage fund theory