Historical Development of Classical Economics Flashcards
What is the concept of Physiocracy?
An early economic theory emphasizing agriculture as the source of wealth.
Who is known as the “father of economics”?
Adam Smith.
What is Adam Smith’s key contribution to economics?
His book The Wealth of Nations introduced the concept of the invisible hand and free markets.
How does David Ricardo’s theory of comparative advantage contribute to trade?
It shows that countries benefit from trade by specializing in goods they produce most efficiently.
What is the classical view on population growth?
Malthus argued it outpaces resources, leading to poverty unless checked.
How do classical economists view wealth creation?
As a result of productive labor and efficient resource allocation.
What is the classical theory of value based on?
The labor theory of value, where the value of goods is determined by labor input.
Name one shortcoming of classical economics.
It assumes full employment and ignores cyclical unemployment.
How did Keynes challenge classical economics?
He argued that aggregate demand, not supply, drives economic activity.
What role does innovation play in classical economic theory?
It is often underemphasized, unlike in modern growth theories.
