Theorists

Question 1

Explain the Invisible Hand theory and say who came up with it

Answer 1

Unseen forces that move the free market economt via incentives ; Adam Smith

Question 2

Who advocated for limited gov intervention?

Answer 2

Freidrich Hayek

Question 3

Describe the Nash Equilibrium

Answer 3

For any finite game, all players can arrive at an optimal outcome

Question 4

Who came up with ‘animal spirits’?

Answer 4

Keynes

Question 5

Who came up with comparative advantage?

Answer 5

Ricardo

Question 6

Describe the Marshall-Lerner Condition

Answer 6

A currency devaluation will only lead to an improvement in the balance of payments if the sum of elasticity of demand for imports and exports is greater than 1

Question 7

Describe Harrod Domar’s model of growth

Answer 7

Savings are needed to provide funds for investment which leads to growth and development

Question 8

Describe the Lewis Dual Sector Model

Answer 8

Developing economies have a surplus of unproductive labour in the agricultural sector which will turn to manufacturing, leading to development

Question 9

Define the Prebisch Singer hypothesis

Answer 9

The price of commodities decreases over time relative to manufactured goods

Question 10

Describe the Hechscher-Ohlin model

Answer 10

Countries specialise in what they have comparative advantage in: if capital, export capital- intensive + import labour-intensive products and vice versa

Question 11

Who came up with the kinked demand curve and what does it show?

Answer 11

Paul Sweezy

Shows interdependency in oligopolies - sticky prices