Johns Hopkins. Ten comprehensive economics PhD exams, 1965

 

 

This is what a full set (more-or-less) of written comprehensive examinations from a Ph.D. program in economics looks like as of 1965. The archival records from Johns Hopkins University are in pretty good shape for their graduate program. Earlier exams will be transcribed and posted down the road on the installment plan.

Six exams from 1961 are posted here.

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[Handwritten Note:   Christ. FULL SET EXCEPT: 1) Hist of Theory: oral 2) Ops Res: Courses.]

Ph.D. Written Comprehensive Examination in MICROECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 19, 1965

Candidates should answer each question; all questions are assigned equal weight.

1. “If a price system did not exist, it would be necessary to create one.” Discuss in some detail recent developments in general equilibrium theory (i.e. in the last fifteen years) that have increased and deepened our understanding of the meaning and limitations of this aphorism.
2. Suppose that a firm, faced with a downward sloping demand curve for its single product, is maximizing its income from sales at an output where total average cost is rising. The firm is then sold on a competitive market to the highest bidder, who—it is assumed—will also maximize his income when he operates the firm.
   1. What considerations will determine the price paid for the firm?
   2. What will be the income of the new owner from operating the firm?
   3. How will the new output compare with the old?
   4. How will the slope of the total average cost curve in its new situation differ from that in the old?
3. In a letter to Edgeworth, Marshall once wrote: “You know I never apply curves or mathematics to market values. For I don’t think they help much. And market values are, I think, either absolutely abstract or terribly concrete and full of ever-varying (though individually vital) side-issues. Also Ox for market values measures a stock and not a ‘flow’; and I found that if I once got people to use Demand and Supply curves which discussed stocks along this axis of x, they could not easily be kept from introducing the notion of a stock when flow was essential.”
   Discuss the following: (a) the relation of the ideas expressed in this quotation to Marshall’s period analysis of the firm and industry; (b) the Walrasian treatment of the same issues; (c) the current treatments of these issues, as exemplified in good textbooks on price theory; (d) your own opinion of the validity, relevance and usefulness of the distinction which Marshall is making here.
4. The cost of providing service on a road bridge at a certain crossing of the Chapaqua River is C = dX + e. The consumer demand for the services of the bridge may be expressed as T = f – gX, ignoring differences in types of traffic. The time spent crossing the bridge by the average user is H = a + bX + cX², and it is assumed that the opportunity cost of the average user is valued at 80 cents per hour.
   What toll should be set on this bridge?
   (C = cost, in dollars; H = time spent on bridge, in hours; T = toll per vehicle, in dollars; X = number of vehicles using bridge; a, b, c, d, e, f, g are constants in the problem.)
5. “The real content of the equilibrium concept is to be found not so much in the state itself as in the laws of change which it implies.” (John Chipman).
   Would you agree with this characterization? If so, why? If not, why not? Analyse the concepts which are currently used in order to derive laws of change from consideration of equilibrium states.

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Ph.D. Written Comprehensive Examination in MACROECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 20, 1965

[There are 180 points on the exam – allocate your time carefully.]

1. Choose 4 from the following set of 5 questions. [Each is worth 25 points.]
   1. Suppose you were the Chairman of the Council of Economic Advisers. Outline and defend your policy program for the next year, paying particular attention to the problems of full employment, growth, stability and the balance of payments.
   2. An extremely general form of an investment function may be written as:
      I = f(y, r, k_-1, I_-1)
      where I = investment, y = income, r = interest rate, k = capital stock.
      Relate this to
      1. the acceleration principle
      2. the Keynes-Hansen stagnation thesis
      3. the Goodwin model of the business cycle
      4. empirical studies of investment behavior
   3. Discuss the present state of empirical knowledge concerning the nature and properties of the consumption function.
   4. Here are two statements by prominent economists:
      1. “That Keynes’ theory of under-employment equilibrium depends on the assumption of rigid wages should be clear to everybody.” G. Haberler, QJE, Nov. 1949, p. 570.
      2. “The numerous remarks throughout the literature that Keynes relied on wage inflexibilities to obtain his results are entirely unsubstantiated.”
         R. Klein, The Keynesian Revolution, 1947, p. 90.
         1. Using a macro model of your choice, present the details of this classical argument.
         2. Either (1) attempt to reconcile these opposing views,
            or (2) pick one side and defend it.

5. Give two analyses of macroeconomic behavior, (a) for full employment and (b) for unemployment, using the equation MV = Py (or M = kPy) in each case, where M = money stock, V = 1/k = velocity of money, P = price level, y = real income.

2. Answer all of the following 5 questions (Each is worth 16 points).
   1. “In growth models of the Harrod-Domar type, behavioral shifts toward more saving have a stimulating effect on GNP, yet in a simple Keynesian model, the opposite is true.” Is this contradiction apparent or real?
   2. Attack or defend the following proposition: “Microeconomics and macroeconomics are not two distinct fields, but are one and students should not be asked to study them separately and be examined in them separately.
   3. Briefly summarize the several empirical and theoretical arguments which support the hypothesis that the stock of money willingly held should be a function of the interest rate.
   4. Discuss briefly the “Patinkin controversy” concerning Say’s law and the quantity theory of money.
   5. “Compensatory fiscal policy must have a weaker effect in the short run if consumption depends on ‘permanent income’ than if consumption depends on current income, other things the same.” Discuss.

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Ph.D. Written Comprehensive Examination in AMERICAN ECONOMIC HISTORY

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 22, 1965

Do both questions in Section I and three out of six in Section II.

1. a. The attached table presents information on an American industry. Discuss the technological change evident in the data. Is the pattern typical of other nineteenth century industries? Does the pattern tend to substantiate Habakkuk’s position?
   2. Choose any open question in American economic history. Discuss the current thought about this problem and propose some feasible approach to the problem which might dispel much of the uncertainty now obvious in the literature.
2. a. The nineteenth century immigrant was attracted to the United States by the high American standard of living. Discuss.
   2. What were the principle sources of capital for industry and transportation in the pre-Civil War era?
   3. What role did the foreign sector play in American development during the nineteenth century?
   4. Except for short 3-6 year fluctuations, the rate of growth of the United States has remained relatively stable. Discuss.
   5. Discuss and evaluate one development policy followed by the government in the nineteenth century orthe governmental development policies in one area during that period.
   6. A recent proposal suggests that the growth process can be considered in three stages – each characterized by the principle constraint to growth. During the first stage growth is constrained by the insufficiency of skill, during the second by a lack of domestic capital, and during the final stage by considerations of foreign imbalance. Discuss the application of such a theory to the American experience.

Table

Year	U.S.	Mass.	Large Firms
OUTPUT (Physical Units)
1820	3,053		468
1831	23,046	7,923	1,264
1837		12,632	3,545
1845		17,568	4,843
1849	76,368	29,875	7,221
1855		31,500	9,165
1859	114,825	41,529	10,560
CAPITAL (Machine Sets)
1820	215		20
1831	1,246	340	52
1837		565	136
1845		817	174
1849	3,527	1,288	254
1855		1,520	331
1859	5,235	1,673	362
EMPLOYEES
1820	153
1831	621	133	12
1837		198	28
1845		207	33
1849	980	287	45
1855		348	54
1859	1,220	385	53

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Ph.D. Written Comprehensive Examination in INTERNATIONAL ECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

3 hours, maximum points 180.

PART I (10 points each). Answer all.

1. Explain the principle of comparative advantage, and illustrate with a diagram.
2. Derive the expression giving the equilibrium relationship between the spot exchange rate and the 90-day forward rate in a two country model with interest rates assumed fixed in both countries.
3. The official U.S. measure of a balance-of-payments surplus or deficit is the “overall balance.” Define the “overall balance” and indicate the principal shortcomings of this measure.
4. Define “terms of trade” and indicate the significance of the concept.
5. What is the “transfer problem”?
6. Derive the expression for the change in national income resulting from an autonomous increase in exports.

PART II Answer 3 out of 5 (40 points each).

1. Utopia is a small, highly developed country with capital (K) as its only factor of production. Utopia consumes two goods, x₁and x₂, and its community utility function is given by U=x₁x₂. Its production function for x₁ is x₁= a₁K, and its production function for x₂ is x₂= a₂K^b. (a₁, a₂, b are all greater than zero). Its endowment of capital is K. Since Utopia is a small country, it takes the world prices of x₁and x₂ as given.
   1. For what values of b is it certain that Utopia will produce either all x₁ and no x₂ or all x₂ and no x₁?
   2. If b = 1/2, at what world price of x₂ in terms of x₁ will Utopia produce only x₂?
   3. If b = 1/2, at what world price of x₂ in terms of x₁ will Utopia produce only x₁?
2. It has been argued that a fixed exchange rate system works better the greater the interest elasticity of international capital flows, and that a flexible rate system works better the smaller the interest elasticity. Being careful to define “works better”, discuss the assumptions that might underlie this contention.
3. “In a purely static analysis it is clear that a country, far from being annoyed, should be delighted when foreign countries “dump” their exports on world markets at low prices. But dumping invariably gives rise to cries of dismay in the country importing the dumped goods, and rightly so. A consideration of the dynamic effects of dumping leads to the conclusion that a protective tariff is justified in this case.” Discuss.
4. “In a sense, practically all arguments for tariffs are second-best arguments. If it is desired to alter the internal distribution of income, then the “first-best” policy would be to do so by direct taxes and subsidies. If this is not possible (i.e. there is a constraint in tax policy), it may be done by tariff protection. But while this will achieve the aim it will also have side effects which are adverse, and the welfare attained with the tax constraint will not be as high as without it; indeed, welfare could fall. (Corden)
   Discuss the above contention with respect to any possible aim or aims of tariff policy other than income redistribution.
5. “The verdict, so far, on the various attempts to test the Heckscher-Ohlin trade theory is, quite simply, ‘inconclusive’.” Discuss this with respect to the predictions of the theory and one or more of the tests to which these have been subjected.

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Ph.D. Written Comprehensive Examination in LABOR

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

PART I. (2 hours, 15 minutes)

1. Why do people travel faster today than they used to?
2. Some people believe that there has been no technological change in the education “industry”. Others believe that there has been the same rate of technical change in this area as in the rest of the economy. What implication does this have for the question of whether the rate of return on education has changed over time?
3. G. Lewis maintains that unions have not raised wages in the U.S. by very much. Do you think this is an accurate statement? Are there any circumstances under which unions might have a substantial effect on real wages?
4. Do you think that there are any circumstances under which the introduction of featherbedding into a collective bargaining agreement would yield a better allocation of resources?

PART II. (45 minutes)

5. Define, and comment briefly on each of the following terms:
   1. equalizing difference
   2. secondary boycott
   3. structural unemployment
   4. productivity
   5. wage-push inflation
6. Most Keynesian macro models include the assumption that the supply of labor is infinitely elastic, at least up to full employment, at the existing money wage. Can this macro rigid money wage assumption be reconciled with the micro assumption that only relative prices matter?

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Ph.D. Written Comprehensive Examination in LOCATION

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

Do all three sections.

1. Choose an unsettled problem in location theory. Discuss and criticize the current state of the literature. How would you proceed in extending the present knowledge concerning this problem?
2. a. How would you proceed in analyzing the factors influencing the location of a single industry?
   2. Apply your method to some industry.
3. a. Discuss the effect of external economies on some industry. (You may not use the industry of section II, part (b).)
   or
   2. Discuss and criticize the technique used in measuring the geographical concentration of industry and regional specialization.

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Ph.D. Written Comprehensive Examination in MATHEMATICAL ECONOMICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

Answer 4 questions.

1. The following are well-known equations summarising certain aspects of the behavior of an individual consumer
   
   where x_j, p_jrepresent quantity and prices of the j^thcommodity, M represents money income, and  , where U is the consumer’s utility function.
   1. Derive the equations from a standard model of consumer behavior.
   2. Discuss the sign of the term x_rr
   3. Give an interpretation of .
   4. Outline the effects on the equations of replacing U by f(U), where f´(U) > 0 for all U.
2. Choosing any suitable general equilibrium model which involves both production and consumption, define an equilibrium for the model, set out postulates which are sufficient to guarantee the existence of the equilibrium, and sketch out the role played by each postulate in giving the guarantee of existence.
   What, in your opinion, is the function of proofs of the existence of an equilibrium?
3. In a linear production model, there are two activities which use three resources in quantities (2, 1, 1) and (1, 3, 1), respectively, per unit activity level. The resources are available in quantities (10, 10, 5.5) at most. Receipts from unit levels of the two activities are (4,3).
   1. Set up the problem of maximizing total receipts in linear programming form.
   2. Write down the dual problem.
   3. The solution is included among activity vectors (4,2), (4.5,1), (3.25, 2.25) and dual vectors (1,0,2) (0,3,1). Identify the infeasible activity vector and the optimal activity vector, giving reasons.
   4. State the maximum prices the firm would be willing to pay for its resources.
   5. Discuss the relationship between dual variables in linear programming theory and prices in economic theory.
4. Set out the leading properties of square non-negative matrices. Show how these properties are used in economic theory in relation to
   (a) input-out models of Leontief type, and
   (b) stability analysis of multi-market equilibrium.
5. Carefully describe the Von Neumann growth model, interpreting its chief results and relating them to other, not necessarily linear, multisector growth models.

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Ph.D. Written Comprehensive Examination in MONEY

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 23, 1965

PART I (60 points). Indicate whether each of the following statements is true, false, or uncertain, and explain your answer.

1. If the quantity theory holds, the level of real output and the price level are independent of the supply and/or mix of non-money financial assets.
2. At full employment the equation of exchange goes from an irrefutable identity to a useful price-level empirical relationship.
3. The rate of interest is purely a real phenomenon if money is neutral.
4. The Treasury should lengthen the average maturity of the public debt when long-term interest rates are low.
5. The demand for money is a function of the real rate of interest rather than the money rate of interest.
6. If a commercial bank raises new capital by a common stock issue, its reserves will rise permitting a multiple expansion in the money supply.

PART II (60 points). Listed below are four proposals for new legislation. For each proposal, discuss the probable economic effects were the proposal to be enacted and indicate your views on the desirability of the proposal. (Consider each proposal separately; i.e., as you discuss one proposal assume that none of the others has been enacted.)

1. Require the Federal Reserve to support the prices of Government securities whenever their yields reach 4 ¼ percent.
2. Allow commercial banks to pay any interest they deem proper on demand and time deposits.
3. Require the Federal Reserve to produce a money supply which is as close as is practicable to a 3 percent annual rate growth path.
4. Provide that members of the Board of Governors of the Federal Reserve System may be appointed to, or removed from, office at any time by the President of the United States.

 

PART III. (60 points). Answer two.

[Handwritten note: THIS PAGE WAS NOT GIVEN. (i.e. Part III)]

1. “Economists are frequently skeptical about the effects of price flexibility in goods markets because they feel that price declines will lead to expectations of further price declines resulting in a reduction in consumption. If expectations as to future prices of long-term bonds are determined in a similar way, the liquidity trap will not exist and, in fact, the economy will be very sensitive to changes in monetary policy.” Discuss.
2. Today, monetary policy is generally considered to be useful for dealing with economy-wide stabilization problems but not with regional stabilization problems; overheated regions and depressed regions must be treated with different medicines. But the Federal Reserve System consists of twelve regional banks and its founders thought a regional monetary policy was possible. What economic conditions would have to prevail before a regional monetary policy would be possible?
3. Outline the major aspects of the Gurley-Shaw hypothesis, and discuss its merits. What empirical observations would lead you to accept or reject the hypothesis? (Is the fact relevant that in recent months the rate of growth of money supply plus time deposits has remained unchanged while the rate of growth of money supply alone has declined substantially?)

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Ph.D. Written Comprehensive Examination in PUBLIC FINANCE

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

PART I (40 min.)

For each of the following indicate whether the statement is true, false, or uncertain, and then explain your reasoning. (Statements in parentheses may be taken as correct.)

1. (In a suburban Los Angeles owner-occupied housing development in a recent year, real estate tax payment as a fraction of annual family income was higher for lower-income families than for higher-income families.) The foregoing fact shows that the residential real estate tax is a regressive tax.
2. There is no advantage or disadvantage to the investor in holding tax-exempt municipal bonds because market demands will have adjusted so as to equate the after-tax yields on the two.
3. (Available empirical evidence indicates that the after-tax rate of return on equity in the corporate sector has changed very little since the late 1920’s despite the fact that the corporate income tax rate has increased from 11% to over 50%.) From this evidence one can conclude that the effect of the tax has been to raise corporate product prices or to lower the prices of corporate-hired factors of production, or some combination of these two, so that the tax has been simply shifted away from corporate profits with no change in resource allocation.
4. Marginal cost pricing should be employed for all public utility undertakings.

 

PART II (70 min.) Answer any 2 of the following:

1. Discuss briefly the issues raised by the proposal of Mr. Heller (former chairman of the Council of Economic Advisers) to transfer certain Federal tax receipts to the states.
2. Discuss briefly the consequences of Representative Patman’s proposal to finance the Great Society by a loan of $25 billion from the Federal Reserve to the Treasury at an interest rate of ¼ of 1% per year.
3. Discuss the likely impact of the current proposal to reduce excise taxes upon
   1. The level of aggregate demand
   2. The degree of automatic stabilization of the economy
   3. The distribution of income if taxes on luxury items are eliminated.
4. Compare, contrast, and evaluate the effects and merits of the following programs to stimulate investment:
   1. Militant easy money programs
   2. Tax inducements such as
      1. Accelerated depreciation
      2. Investment tax credits
      3. Shifts to consumption-expenditure taxation away from income taxation.

 

PART III (70 min.) Answer any 2 of the following:

1. Indicate the role of government in promoting economic growth in the following models:
   1. Neo-classical models of economic growth à la Solow.
   2. Fixed-proportions models à la Domar.
   3. An economy where government stabilization policy is required to maintain full employment.
2. Define a public good; a social want. What special problems do they pose to a government which is interested in both resource allocation and optimal income distribution?
3. Two countries decide to join in an economic union. They wish to have free trade and optimal resource allocation within the union.
   1. One country has a tax system relying solely on a value-added tax and the other one has a proportional income tax. Would an adjustment to exporters or importers be necessary for these taxes?
   2. Suppose the taxes were a value-added tax and a proportional tax on consumption. Would your answer be the same?
4. How could the government use fiscal measures to improve resource use in transportation?

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Ph.D. Written Comprehensive Examination in ECONOMETRICS

DEPARTMENT OF POLITICAL ECONOMY
THE JOHNS HOPKINS UNIVERSITY
April 24, 1965

Part I

Define or explain briefly:

1. multicollinearity
2. consistent estimator
3. asymptotically efficient estimator
4. asymptotic variance of an estimator
5. asymptotically normally distributed estimator
6. best linear unbiased estimator
7. Monte Carlo study
8. specification bias
9. specification error
10. autoregressive disturbances

 

Part II (answer two out of three)

1. Write an essay on the identification problem in which you indicate (a) the definition of “identification”, (b) why the problem arose in the economic literature rather than in the broader statistical literature, (c) the relation of identification to estimation, and (d) some of the important theoretical results concerning identification criteria. In (d), be careful to state carefully the assumptions on which the results rest.
2. Describe the two-stage least squares estimator in words. Then write down a mathematical expression for it, defining your symbols.
3. Discuss some of the principal difficulties in estimation that are sometimes encountered when disturbances are serially dependent, and indicate under what circumstances each arises or does not arise. Indicate also what techniques (if any) are available to deal with each difficulty, and how they deal with the difficulty.

 

Part III (answer two out of four)

1. Suppose that current consumption c_t were a linear function of current expected income yet, with an additive disturbance u_t that is serially independent with mean zero and constant variance. Suppose also that current expected income is a weighted average of current actual income y_t and lagged expected income y_e,t-1, with constant weights and with an additive disturbance v_t that is independent of u_t and serially independent with mean zero and constant variance. Suppose also that income is exogenous. What problems would be encountered in the attempt to obtain consistent and asymptotically efficient estimators of the slope and intercept of the consumption function described? What information and techniques would enable you to solve them? Explain.
2. Discuss the effects of multicollinearity upon the estimation of parameters by ordinary least squares. In your discussion assume that the distribution of disturbances is spherical and that the regressor observation matrix X is fixed in repeated samples.
3. Specify the necessary conditions under which the method of instrumental variables provides consistent estimators in circumstances where ordinary least squares fails to do so.
4. If a regressor is correlated with the disturbance then classical least squares estimation will result in a biased estimator of the influence of variations in the regressor on variations in the regressand. What can you say about the direction and extent of this bias?

 

Source:  Johns Hopkins University, Eisenhower Library, Ferdinand Hamburger, Jr. Archives. Department of Political Economy, Series 6, Box 1, Folder “Comprehensive Exams for Ph.D. in Political Economy 1947-1965”.

Image Source: From the Johns Hopkins University seal on the cover of the 1966 yearbook Hullabaloo.