Category: Exam Questions

Categories
Exam Questions M.I.T.

M.I.T. Core Micro Theory. Exam Questions for Resource Allocation/Price System. Weitzman, 1973

 

In earlier posts I provided transcriptions of the course outline and readings and the final examination questions for Martin Weitzman’s 1974 course on resource allocation and the price system that was the second of four half-term courses that made up the required core graduate microeconomic theory sequence at M.I.T. back then. In the approximately one hundred page typescript that he distributed for his course Weitzman also included three earlier exams from his course. These exams are transcribed below. The September exam was offered for people to place out of taking the course, the November exam would have been the actual course final examination, and I presume the following February exam was offered as a make-up examination.

An expression that Martin Weitzman was fond of saying to get us to think about the economic intuition behind some result or to motivate an argument was for us to first consider “a quick-and-dirty banker’s calculation”. The diagram above was just borrowed from a random blog post because of its “quick-and-dirty” theme and was never used by Weitzman.

_________________

Typically three questions are answered in an hour and a half.

Exam
(September, 1973)

  1. There are n “investment opportunities” indexed by i = 1,2,…, n. Up to ci dollars can be invested in the ith investment opportunity, and each dollar so invested yields ai present value dollars back (ai > 1). There is a budget constraint limiting investment spending to M dollars.
    1. Specify the programming problem of picking investments to maximize returns subject to a budget constraint.
    2. Describe precisely the solution to the problem.
    3. What is the shadow price of an extra dollar of budget?
    4. If a new project is discovered which pays an+1 per dollar invested, should it be undertaken? Show how the shadow price of an extra dollar of budget can be used to easily give an answer. (Hint: if you are having trouble, try a numerical example.)
  2. There are n ways of combining capital with labor to produce output. The ith technique (i = 1,…,n) has coefficients ai for labor per unit of output and bi for capital per unit of output. If K units of capital and L units of labor are available, we can define a production function F(K,L) as follows:

\begin{array}{c}F\left( K,L \right)=\max \sum\limits_{i=1}^{n}{{{y}_{i}}}\\\text{subject to}\\\sum\limits_{i=1}^{n}{{{a}_{i}}{{y}_{i}}}\le L\\\sum\limits_{i=1}^{n}{{{b}_{i}}{{y}_{i}}}\le K\\{{y}_{i}}\ge 0.\end{array}

a. Prove that F(K,L) is concave and homogeneous of degree one in K and L.
b. Interpret the shadow prices associated with the inequalities in labor and capital, for a given K and L.

  1. State clearly…
    1. …the conditions under which it is possible to decentralize allocation decisions and yet achieve efficiency in a production system by using prices.
    2. Prove the theorem you have just stated, or at least sketch an outline of it.
    3. Comment on the importance of the convexity assumption. Will and non-convexity spoil the situation irreparably? What about externalities?
  2. A village owns given amounts of grade A land, and grade B. The total labor supply of \overline{L}=5 is used solely for growing corn. The production function for grade A land is {{Y}_{A}}=12{{L}_{A}}-2L_{A}^{2} and for grade B land is {{Y}_{B}}=7{{L}_{B}}-\left( 1/2 \right)L_{B}^{2}. Naturally {{L}_{A}}+{{L}_{B}}=\overline{L}.
    1. The village uses the land as communal property to give each man an equal income, i.e., everyone gets an amount of A land or an amount of B land which yields each one the same output when he works it. Spell out in detail what this solution implies. Is this an efficient social production scheme? Why or why not?
    2. Suppose the village chief hires a consultant from 14.122. His problem is to maximize total output (YA+ YB) subject to production constraints. Then returns are equally distributed. What is the solution? What is the marginal product of labor?
    3. Let the marginal product of labor from (b) be w. Now show that if plots A and B are run as profit-maximizing firms with w being the wage rate (maximize separately {{Y}_{A}}-w{{L}_{A}} and {{Y}_{B}}-w{{L}_{B}}), that society ends up with the same solution as in (b). What does this mean? What is the difference between (b) and (c) especially as regards workers’ welfare? Are the workers better off under (a) or (c)? Would your answer have to be the same if the production functions changed? Explain.
  3. The following table specifies four processes for the production of steel. Assume
    1. factors of production are perfectly divisible and transferable among processes,
    2. all processes exhibit constant returns to scale,
    3. the wage rate is $10 per man/day,
    4. production is always efficient.
Factor requirements/ton of steel/day
Process No. Man-days Machine days
1 2 5
2 4 3
3 2 2
4 6 1

(i) Initially only processes 1 and 2 are known and both are in use. Draw one diagram showing the unit isoquant for steel production and another showing the long-run average total cost curve for steel production. Indicate the magnitude of long-run average total cost per ton of steel on your cost diagram.
(ii) Show on the relevant diagrams the unit isoquant and long-run average total cost curve which prevail after the discovery of processes 3 and 4.
(iii) Suppose that prior to the change in technology some firm was producing 10 tons of steel per day by operating each process at a level of 5. On your cost curve diagram show this firm’s short-run average total cost curve before and after the change in technology. Indicate the magnitude of any shifts in the cost curve on your diagram. (Note: in the short-run labor can be hired in any desired amount but the total amount of machinery a firm possesses is fixed.).

 

Exam
(November, 1973)

  1. There are n types of machine, indexed by i= 1,2,…, The ith type of machine is designed to work with {{\alpha }_{i}} workers, in which case it produces {{\beta }_{i}} units of output. There are {{\gamma }_{i}} machines of type i available.
    1. Formulate the problem of finding the minimum amount of labor to produce a given amount of output, say .
    2. Describe precisely the solution to the problem for arbitrary .
    3. What is the shadow cost of an extra unit of output and why?
    4. What is the shadow rental on a machine of type iand why?
    5. If a new machine is discovered of type n+1 with specification {{\alpha }_{n+1}}, {{\beta }_{n+1}}, {{\gamma }_{n+1}}, should it be used? Show how the shadow cost of an extra unit of output can be used to easily give an answer.
  2. There are n plots of land. Land of type i (i= 1,…,n) can be used to grow either ai bushels of wheat or bi bushels of rye (or the appropriate combination).
    1. Characterize efficient specialization patterns for these n plots of land. Which land should grow which crop and why?
    2. Suppose (as in a competitive market economy) a price of wheat is announced and also a price of rye. Then every plot grows the profit maximizing crop. Is this efficient? Why or why not? (show directly).
    3. Show how a supply of wheat curve would be derived in a market economy. Is it upward sloping? Why or why not?
  3. A firm consists of two plants. For each of statements (a) and (b), either prove the statement or give a counterexample. Be precise.
    1. The firm’s overall production plan will be efficient whenever each plant is producing efficiently.
    2. If both plants are maximizing profits at the same prices, the resulting overall plan will be efficient for the firm.
  4. There are two products in an economy (guns and cars) and two basic factors of production (A and B). There are n techniques for producing guns: the ith technique uses ai units of A and bi units of B per gun. Similarly there are m techniques for producing cars: the ith technique uses up ai units of A and bi units of B per automobile. The economy has a total availability of units of A and units of B.
    1. Define carefully the production possibilities set for this economy. Sketch roughly what it looks like in the space of cars and guns.
    2. Prove that it must be convex (what does this mean geometrically?).
    3. State carefully why (b) is important for the possibility of effective indirect or decentralized control (using prices) of the way guns and cars will be produced.
  5. We derived the result that a free market competitive allocation of resources is efficient. Does this mean that a market system is the best way to organize an economy in the sense that it gives the greatest benefits? Why or why not? What are the major real world situations which would cause an exception to the above cited “result” in a real life market economy? Try to be as specific as possible in showing why and where the efficiency result breaks down for each cited example.
  6. Suppose a firm or economy consists of a number of divisions or subsectors, each of which is characterized by a convex technology. Then any efficient plan will have associated with it a set of prices (one for each good, the same prices for each subsector) such that the efficient plan is sustained by having each subsector maximize its own profits. Outline a detailed sketch of how the proof of such an assertion goes. Why is this sometimes called a “decentralization theorem”. What does it suggest as a way of efficiently organizing production?
  7. An organization has 2 inputs and 2 outputs, and a production set consisting of the following 7 activities, all scalar multiples of activities in the set, and all sums of activities in the set.
Activity a b c d e f g
Good 1 2 1 2 1 1 3 1
Good 2 0 2 1 1 1 1 3
Good 3 -2 -4 -3 -1 -3 -5 -6
Good 4 -2 -3 -4 -3 -1 -5 -4

a. Consider a plan to run activities (a, d,e) at a positive level. If this were an efficient plan, what shadow prices would be associated with it?
b. Is this plan efficient, in fact? Prove your answer by appealing to particular theorems or results.
c. Consider a plan to run activities (a, b,d) at a positive level. Is this an efficient? Why, or why not?

 

Exam
(February, 1974)

  1. A firm consists of two plants. There are no externalities. For each of statements (a) and (b), either prove the statement or give a counterexample. Be precise.
    1. The firm’s overall production plan will be efficient whenever each plant is producing efficiently.
    2. If both plants are maximizing profits at the same positive prices, the resulting overall plan will be efficient for the firm.
        An organization has a production set consisting of the following 7 activities, all scalar multiples of activities in the set, and all sums of activities in the set.
  2. An organization has a production set consisting of the following 7 activities, all scalar multiples of activities in the set, and all sums of activities in the set.
Activity a b c d e f g
Good 1 2 1 2 4 0 3 0
Good 2 2 5 1 0 -1 1 2
Good 3 -1 -3 -1 -1 1 -2 0
Good 4 -2 -3 -4 -4 -3 -3 -1

a. Consider a plan to run activities (a,d,e) at a positive level. If this were an efficient plan, what shadow prices would be associated with it?
b. Is this plan efficient, in fact? Prove your answer by using the prices from (a) and appealing to particular theorems or results.
c. Consider a plan to run activities (a,d,g) at a positive level. Is this an efficient plan? Why, or why not?

  1. State…
    1. …clearly the conditions under which it is possible to decentralize allocation decisions and yet achieve efficiency in a production system by using prices.
    2. Prove the theorem you have just stated, or at least sketch an outline of it.
    3. Comment on the importance of the convexity assumption. Will any non-convexity spoil the situation irreparably? What about externalities?
  2. The following table specifies four processes for the production of steel. Assume
    1. factors of production are perfectly divisible and transferable among processes,
    2. all processes exhibit constant returns to scale,
    3. the wage rate is $10 per man/day,
    4. production is always efficient.
Factor requirements/ton of steel/day
Process No. Man-days Machine days
1 1 2.5
2 2 1.5
3 1 1
4 3 .5

(i) Initially only processes 1 and 2 are known and both are in use. Draw one diagram showing the unit isoquant for steel production and another showing the long-run average total cost curve for steel production. Indicate the magnitude of long-run average total cost per ton of steel on your cost diagram.
(ii) Show on the relevant diagrams the unit isoquant and long-run average total cost curve which prevail after the discovery of processes 3 and 4.
(iii) Suppose that prior to the change in technology some firm was producing 10 tons of steel per day by operating each process at a level of 5. On your cost curve diagram show this firm’s short-run average total cost curve before and after the change in technology. Indicate the magnitude of any shifts in the cost curve on your diagram. (Note: in the short-run labor can be hired in any desired amount but the total amount of machinery a firm possesses is fixed.)

  1. Consider the following production function:Y={{T}^{\alpha }}{{L}^{1-\alpha }}
    where Y is output, T and L are inputs and 0 < {{\alpha }} < 1.

a. Prove that this production function has constant returns to scale.
b. Describe the production set that corresponds to this production function. Which points are efficient?
c. Given an arbitrary efficient point (Y*, T*, L*), find the shadow or efficiency prices associated with that point.
d. Prove that the production set is convex.

  1. Let i be an index of land plots running from 1 to 10. The higher the index, the more moisture in the soil. Either rye or wheat can be grown. Land of type i (i=1,…,10) can costlessly produce either 5 units of rye or i units of wheat (or an appropriate combination).
    1. If a total of 30 units of rye is to be grown, what is the most wheat that can also be obtained?
    2. For the same situation as in (a), what are the shadow prices of wheat and rye? Explain fully what these shadow prices mean. What is the shadow rent on land of various types?
    3. Describe in general the efficient patterns of specialization. Which land should grow which crop and why?
    4. Derive the supply of wheat curve and show what it looks like.
    5. Verify that any profit maximizing output combination is efficient.

Source:  Martin Weitzman’s Notes to 14.122, personal copy of Irwin Collier, pp. 88-97.

Image Source: Blogpost: “The truth about quick and dirty” POSTED BY NIK ⋅ 10 JULY 2007 at niksilver.com

Categories
Exam Questions Oxford

Oxford. Five Economics Exams. Intro, Intermediate, History, International, Money & Banking, 1902

 

Something I find particularly interesting in the following five exams is that the second course in political economy at Oxford in 1902 was based upon the American textbook, Political Economy, by Francis A. Walker.

________________

SECOND PUBLIC EXAMINATION.
Pass School. Group B. 3.
Political Economy. I.

Adam Smith’s Wealth of Nations.

Time allowed—3 Hours.

  1. “Why have gold and silver been commonly chosen as the material of money?
  2. How far did Adam Smith anticipate (a) the Malthusian theory of population, (b) the law of diminishing returns?
  3. Explain why the earnings of labour are different in different occupations.
  4. Give an account of the Mercantile System and describe the chief methods adopted under its influence.
  5. In what ways have the results of free trade in England differed from those suggested as probable by Adam Smith?
  6. Compare Greek, Roman, and modern colonies as to (a) the motives which led to their foundation, and (b) the conditions of their prosperity.
  7. In what ways, besides taxation, may a state raise revenue? Are any of them important in England at the present time?
  8. What information is given by Adam Smith as to the condition of Hindostan, China, Holland, and Scotland?
  9. Give Adam Smith’s views on—

(a) the importance of the carrying trade;
(b) the expediency of usury laws;
(c) hearth money;
(d) taxes on ale-houses;
(e) land taxes.

  1. Explain and examine the following:—

(a) ‘Labour is the real measure of the exchangeable value of all commodities.’
(b) ‘The whole price of any commodity must finally resolve itself into some one or other or all of three parts.’

[T. T. 1902.]

 

SECOND PUBLIC EXAMINATION.
Pass School. Group B. 3.
Political Economy. II.

Walker’s Political Economy.

Time allowed—3 Hours.

  1. Explain the law of diminishing returns. What is its bearing on the theory of Rent?
  2. To what extent is the condition of the working-classes affected by the absence of perfect competition?
  3. What are the conditions which favour the growth of capital in a country?
  4. What is the connexion between Cost of Production and the Price of a Commodity?
  5. Under what circumstances is it expedient for a country to import goods although it could produce them more cheaply than the country from which they are imported?
  6. Why are the total exports from a country and the total imports into it not usually equal in value?
  7. Describe the chief functions of a modern bank.
  8. What is Bimetallism? What claims are made on its behalf, and how far are they valid?
  9. What is a protective duty? Under what circumstances, if any, is such a duty expedient?
  10. Explain the following phrases: — economic man, territorial division of labour, debasement of coin, depreciation, tabular standard, Gresham’s law, the theory of the diffusion of taxes.

[T. T. 1902.]

Source: Oxford University Examination Papers, Second Public Examination, Pass School, Group B.3. Trinity Term, 1902, pp. 29-30.

________________

 

SCHOOL OF MODERN HISTORY.
Political Economy and Economic History.

[Candidates must answer questions from both sections of the paper.]

I.

  1. What circumstances, in Mill’s opinion, make (a) Wages high, (b) Profits low, (c) Interest vary, (d) Rents fall?
  2. Enumerate, explain, and, if necessary, criticize Mill’s four fundamental propositions respecting Capital.
  3. Explain, with examples, the operation, advantage, and danger of the Credit system, as it exists in England.
  4. Distinguish the forces by which value is determined from the means by which it is measured, and give a careful discussion of the latter.
  5. Discuss Mill’s views upon any one of the following:—

(a) Unproductive Labour.
(b) Competition.
(c) Equality of Taxation.
(d) An inconvertible paper currency.

  1. Comment on the following passages from Mill:—

(a) Hardly anything worse can be said of the worst laws on the subject of industry and its remuneration than that they place the energetic and the idle, the skillful and the incompetent, on a level: and this, in so far as it is in itself possible, it is the direct tendency of the regulations of these unions to do.
(b) The exchange value of a thing may fall short, to any amount, of its value in use; but that it can ever exceed the value in use, implies a contradiction.
(c) A thing may sometimes be sold cheapest, by being produced in some other place than that at which it can be produced with the smallest amount of labour and abstinence.
(d) It must be remembered, too, that general high prices, even supposing them to exist, can be of no use to a producer or dealer, considered as such; [sic]

  1. Define Free Trade. How far do (a) countervailing duties, (b) the recent Tax on imported corn, run counter to the principles contained in your definition?

II.

  1. Do you consider that the economic prosperity of England has been attained by means of, or in spite of, Legislation?
  2. What were the advantages and disadvantages of the Manor System to the peasant?
  3. Do you think that Economic History can be profitably studied apart from the study of Political Economy?
  4. Explain any of the following:—Staple Towns; Convertible Husbandry; Drawbacks; Gresham’s Law; Navigation Acts; Truck Acts; Sinking Fund; Libelle of English Polycye.
  5. Compare the debt which England owes to wool with that which she owes to iron.
  6. Explain and comment upon the following:—
    (a) Therefore, to speak of the abolishing of usury is idle. All states have ever had it, in one kind or rate, or other. So as that opinion must be sent to Utopia. (Bacon’s Essays.)
    (b) In agriculture, too, Nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workmen. (Adam Smith.)
    (c) To found a great Empire for the sole purpose of raising up a people of customers, may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers. (Adam Smith.)
  7. How far did the agricultural improvements of the eighteenth century make the Industrial Revolution possible?

[T. T. 1902.]

 

SCHOOL OF MODERN HISTORY.
Political Economy. A.
Foreign Trade.

  1. ‘The one condition at once essential to, and also sufficient for, the existence of international trade is a difference in the comparative as distinguished from the absolute cost of producing the commodities exchanged.’ Cairnes, cited by Bastable.
    Explain the principle referred to; and give examples from the commercial history of the nineteenth century of mistakes in policy which may be traced to want of acquaintance with this principle.
  2. ‘Tiefgreifende Umwälzungen der Vermögensverhältnisse, wie sie unter Ricardo’s Voraussetzungen zu erwarten sind, können nicht nur für die Kapitalisten, sondern auch für die Masse der Arbeiterbevölkerung so grosse Uebel erzeugen, dass man häufig vorziehen muss, auf eine an sich zweckmässigere internationale Verteilung der Production zu verzichten…. Es ist vorsichtig, darauf zu achten, dass die Wegräumung der schützenden Schranken keine gemeinschädliche Erschütterung des Wirtschaftslebens verursacht.’
    ‘Sogenannte Erziehungszölle haben…für die auf der normalen Höhe der Entwicklung stehenden Kulturstaaten keinen Sinn und Zweck mehr.’ (Lexis.)
    Translate and comment on these passages.
  3. Trace the history of the Corn Trade from 1815 to Referring to Canning’s speech on the Corn Law in the latter year, criticize the measure then proposed by him.
  4. What were the advantages claimed by Macaulay, Peel, and Cobden, for a free trade in corn; and to what extent were these advantages realized by the abolition of the Corn Laws?
  5. Give some account of the Merchant’s Petition in 1820; and trace through the next six years the reforms in commercial policy of which it was the harbinger.
  6. ‘To re-establish duties upon the import of foreign produce, to be regulated by the principle of reciprocity, would be accompanied with insuperable difficulties.’ (Peel.)
    Give instances of the principle of reciprocity being employed by statesmen of the Free Trade persuasion with success.
  7. ‘The Budget of 1860 completed the work of freeing the Statute Book of the United Kingdom from the vast series of tolls which for many hundreds of years had cumbered its pages.’ (Report on the Customs Tariffs, 1897.)
    Review the simplifications of the tariff effected between 1840 and 1860; mentioning instances in which the remission of taxation was attended with an increase of revenue.
  8. Point out some of the difficulties attending the use of import and export statistics. Why is the money value of exports, both (a) absolutely and (b) relatively to that of imports, an imperfect measure of a country’s industrial prosperity?

[T. T. 1902.]

 

SCHOOL OF MODERN HISTORY.
Political Economy. B.
Currency and Banking.

  1. Mention and criticize some of the doctrines combated by Horner and Canning in their defence of the Report of the Bullion Committee.
  2. By what arguments did Ricardo defend the Resumption of Cash Payments against Mr. Western in 1822? Comment upon the ‘opinion which he (Mr. Ricardo) had given of the effect which had been produced on the value of gold by the purchases [of gold] made by the Bank.’
  3. ‘No currency can be good of which the permanent average value does not conform to the permanent average value of a metallic currency; but I do not admit the inference that in order to enable it to do this, its fluctuations in value must conform to the fluctuations in the value of a metallic currency.’ (J. S. Mill.)
    Compare Mill’s doctrine as to the regulation of a convertible currency with that which is embodied in the Bank Act of 1844.
  4. ‘The value of money is settled like that of all other Commodities by supply and demand and only the form is essentially different.’ (Bagehot.)
    Apply this statement to variations in the rate of discount on the London money-market.
    Is there any connexion between fluctuations of discount and permanent changes in the level of general prices?
  5. ‘The question what is the relation between the amount of money in a country and the general scale of prices existing therein’ is ‘perhaps the one upon which the most contradictory opinions have been expressed by economists of reputation.’ (Walker.)
    Express your opinion on this question; referring to the views of leading economists, in particular those of Professor Marshall.
  6. ‘A joint supply of gold and silver will probably be more stable than a supply of either metal separately.’ (Foxwell.)
    Does the principle involved in this statement—the tendency of independent variations to compensate each other—form a strong argument in favour of Bimetallism?
    With what success could the principle be applied to the use of a ‘tabular standard’—based on the variation in the prices of several commodities—for deferred payments?
  7. ‘It is agreed on all sides that violent fluctuations of prices are an evil in the long run; but the difference of opinion is as to whether it is the sudden rise of prices, or the subsequent fall which is mainly responsible for the evil.’ (Marshall.)
    ‘An appreciation of gold will upon the whole tend to put a drag upon production.’ (Foxwell.)
    Compare and comment on the views of Professors Marshall and Foxwell as to the detriment caused by a change in the level of prices.
  8. How would you measure a variation in the value of money with respect to commodities in general between two epochs?

[T. T. 1902.]

Source: Oxford University Examination Papers, Second Public Examination, Honour School of Modern History. Trinity Term, 1902, pp. 32-34

Image Source: Convocation House, looking S.E. 1634–36. ‘Plate 56: Bodleian Library, Convocation House and Schools Quadrangle’, in An Inventory of the Historical Monuments in the City of Oxford (London, 1939), p. 56. British History Online http://www.british-history.ac.uk/rchme/oxon/plate-56  [accessed 13 May 2018].

 

 

Categories
Chicago Exam Questions Fields

Chicago. Money and banking prelim exam questions, 1969

 

In Milton Friedman’s papers at the Hoover Institution Archives are filed copies of three preliminary exams for graduate students in economics from the Winter Quarter of 1969. Recent posts featured the transcriptions of the price theory prelim and the macroeconomics prelim ( or “income, employment and price level” as was the Chicago wont to say). This post takes a walk on the monetary side, namely, with the prelim for the field of money and banking. This exam was followed in the archival folder by a handwritten table by Friedman with the points awarded for the seventeen candidates who took the exam. Out of a maximum score of 240 possible points, the top exam received 189 points.  Failing grades were for 118 points and below (four examinees). The exams have Friedman’s mostly illegible notes written on them, presumably indications of the correct answers. Perhaps some day there will be a brave soul with greater patience than I possess who will try transcribing these academic scribblings of a few years back. 

The reading list for Milton Friedman’s money course from the Winter Quarter 1970 has been posted earlier.

_________________

MONEY AND BANKING
Preliminary Examination for the Ph.D. and the A.M. Degree
Winter Quarter, 1969

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

Your code number and NOT your name
Name of examination
Date of examination

Results of the examination will be sent to you by letter

Answer all questions. Time: 4 hours

  1. [40] The Federal Reserve has recently altered the method of calculating required and actual reserves. Required reserves are now calculated on the basis of average deposits two weeks earlier. Actual reserves equal average cash in vault two weeks earlier plus deposits at Federal Reserve Banks the current week. (There are a few other minor technical details that can be neglected.)
    Under this new system, the adjustment mechanism of the banking system is in principle dynamically unstable (explosive) for any one week by itself.

(a) Explain why the system is dynamically unstable.
(b) What factors render the system stable in practice?
How does the new system affect:
(c) The Federal Reserve’s ability to control the money supply;
(d) The significance of excess reserves, free reserves, and borrowings.

  1. [25] “Central bankers were highly receptive to the Keynesian analysis of monetary policy because it fitted in with their own preconceptions, which were based on the real-bills doctrine.” Explain why you agree or disagree, in the process summarizing the history of the real-bills doctrine.
  1. [25] A major relationship in most income-determination models is the negative interest elasticity of investment. But during the post war period in the U.S., falling interest rates have been accompanied by declining rates of investment in plant and equipment and a rising volume of residential construction.

(a) Does that suggest that residential construction is more interest-elastic than investment in plant and equipment?
(b) How far, if at all, has the observed pattern been related to central bank policy and the structure of financial intermediaries?

  1. [40 ]

(a) Construct a model for the analysis of economic policy in a closed economy, with an exogenous money supply, an income-elastic tax system, flexible prices, and saving a constant fraction of income.
(b) For a unique equilibrium, which variables do you regard as determined by this model, and which outside the model?
(c) Distinguish between monetary and fiscal policy in terms of your model.
(d) Can monetary policy be used to maintain stable prices? Can fiscal policy? Indicate the conditions in the model necessary for only one or the other to be effective.

  1. [40] Consider the problem of explaining the response in a stationary economy to a change that leads to increased unemployment of resources, such as an unanticipated fall in the demand for goods and services. Suppose that any increases in unemployment are temporary, with dynamic properties of the system such that there will be a return to an “equilibrium” or “natural” rate of unemployment if no further unanticipated shocks occur.

(a) Explain what the “natural rate of unemployment” means.
(b) Assume that the quantity of money is constant. Sketch out an explanation of the time path of output, employment of labor, price of goods, price of labor, and interest rate.
(c) Indicate what each of the following concepts means and how, if at all, each is relevant in explaining the adjustments: search unemployment, labor as a quasi-fixed factor of production, Phillips curve, expectations.

  1. [40] The loss in real value of money during inflation has been likened to a tax. Assume that inflation is fully anticipated. How much is the tax, who bears it, and who receives the proceeds:

(a) If there are 100 percent reserves and the central bank pays no interest on reserves, with commercial banks otherwise regulated?
(b) Same as (a) except there is fractional reserve banking?
(c) If there is fractional reserve banking and the central bank pays no interest on reserves, with commercial banks forbidden to pay a nominal rate of interest deposits higher than would be paid in the absence of inflation?
(d) Same as (c) except banks are also forbidden to charge nominal interest rates on loans higher than would prevail in the absence of inflation?
(e) If there is fractional reserve banking, no interest rate regulation on commercial banks, and the central bank pays interest on reserves totaling to the interest payments earned on its assets?

  1. [30] Assume that the U.S. stops pegging the price of gold and of other currencies, and in reaction to this measure[?], the European common market countries form a currency bloc linked internally by fixed exchange rates and permit the exchange rates of the common market currencies to float relative to the dollar. Assume that all other currencies float relative to the dollar.
    Compare monetary adjustment within the two currency areas (i.e. adjustment of the fifty states of the U.S. as compared to adjustment of the six countries of the common market).

 

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 77, Folder 8 “University of Chicago , Econ 331”.

Image Source:  Milton Friedman (undated) from University of Chicago Photographic Archive, apf1-06231, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Exam Questions

Chicago. Graduate economics prelim. Theory of income, employment and price level, 1969

 

The price theory prelim for 1969 at Chicago was transcribed for the previous post. Today’s post gives us the 1969 prelim examination questions for core macroeconomics (in Chicago speak of the day: “Theory of Income, Employment and Price Level”).

The M.I.T. general macroeconomic exams for 1959-1971 were transcribed and collected into a single post.

The copy of the exam in Milton Friedman’s papers at the Hoover Institution includes (Warning: Plot-spoiler!) the answers to the True-False-Uncertain questions:    1=F; 2=F; 3=T; 5=T; 5=F; 6=T; 7=T.

_____________

CORE EXAMINATION
Theory of Income, Employment and Price Level
Winter, 1969

Preliminary Examination for the Ph.D.

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

Your Code Number and NOT your name
Name of Examination
Date of Examination

Results of the Examination will be sent to you by letter

Answer all questions. Time: 3 hours

 

I.

  1. [20] Indicate whether each of the following statements is True (T), False (F), or Uncertain (U), and state briefly your reasons:

____1. If the capital stock is growing, then the marginal efficiency of investment is greater than the marginal product of capital.

____2. In an economy growing at a rate of 4 percent per year in which the income elasticity of demand for money is 2.0, a budget deficit of up to 8 percent of government expenditures can be financed by money creation without producing inflation.

____3. In a simple income determination model, the elasticity of income with respect to changes in the marginal propensity to consume is mpc/(1-mpc).

____4. The instability of the growth equilibrium in Harrod-Domar models can validly be attributed to the particular assumptions made about the production function.

____5. A decline in prices raises real balances for a fixed quantity of money. This is known as the real balance effect.

____6. A real balance effect is compatible with a liquidity trap.

____7. A decrease in rental rates on cars which led to no change in the total number of cars in operation would raise recorded national income.

  1. [20] Fill in the missing numbers and briefly describe how you obtained them. Neglect any effects of the corporation or personal income taxes. Assume all rates are on an annual basis.
Annual interest rate on government consols = 6.5 percent
Annual dividends as a percent of earnings = 25 percent
Dividend yield of common stock = 3 percent
Rate of return on real estate = 5 percent
Annual percentage rate of change of a price index of goods and services =  ______
Percentage rate of change in the price per share of common stock =   ______
  1. [40] Assume that in a closed economy [with flexible prices] tax revenue is proportionate to income, that the government fixes the level of its spending, and that the government finances all budget deficits by money creation. Analyze the consequences of this policy for [What is] the equilibrium level or rate of change of nominal income and show the effect of an increase in the level of government spending from an initial position of equilibrium[?] Discuss separately two cases: (a) the government fixes the nominal level of its spending; (b) the government fixes the real level of its spending.
  2. [30] “It is of no manner of consequence with regard to the domestic happiness of a state whether money be in a greater or less quantity. The good policy of the magistrate consists only in keeping it, if possible, still increasing” (David Hume, 1742). What is the verdict of two centuries of further writing on money on this proposition?
  3. [30] “Many commentators have written as if commercial banks were losing deposits to their non-banking competitors. A closer look, however, shows that this notion is misleading.
    “If a commercial bank depositor writes a check in favor of his mutual savings bank, the savings bank will either re-deposit the check in its own commercial bank account or extend mortgage credit to an individual. The individual, in turn, will either deposit the check in his bank account or turn it over to the seller of the house he is buying. And the seller will either put the check in his bank account or turn it over to his creditors who will put it in theirs….
    “The crucial point is that commercial banks compete for deposits only with other commercial banks. They cannot lose deposits to other financial institutions or financial instruments.”
    Discuss.
  4. [30] Consider the following neo-Keynesian system in which Ctis real consumption, Itis real investment, Ytis real income and Xtis real autonomous expenditures.

{{C}_{t}}-\gamma {{C}_{t-1}}=k\left( 1-\nu \right){{Y}_{t}}
{{I}_{t}}-\delta {{I}_{t-1}}=m\left( 1-\delta \right){{Y}_{t}}+{{X}_{t}}-\delta {{X}_{t-1}}
{{Y}_{t}}={{C}_{t}}+{{I}_{t}}

What are the necessary conditions for stability? If these are satisfied, can the model generate cycles?

  1. [30] Panama has no central bank but uses U. S. currency (plus some coin of its own), relabeling a dollar as a Balboa.
    Netherlands has a central bank, which issues a national currency denominated in guilders.
    The U. S. has a central bank which issues a national currency denominated in dollars.
    The U.S. and Netherlands have fixed exchange rates with other major currencies. Assume that none of the countries has any extensive exchange control.
    The monetary authorities of all three countries proclaim that they cannot control the quantity of money.
    Discuss.

 

Source:  Hoover Institution Archives. Papers of Milton Friedman, Box 77, Folder 8 “University of Chicago , Econ 331”.

Image Source: David Hume’s toe in Edinburgh.

Categories
Chicago Exam Questions

Chicago. Graduate prelim exam questions for price theory, 1969

 

For comparison’s sake, here are the questions for the price theory prelim exam at the University of Chicago in 1964.

_________________

PRICE THEORY
Preliminary Examination for the Ph.D. and the A. M. Degree
Winter Quarter, 1969

WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:

Your code number and NOT your name
Name of examination
Date of examination

Results of the examination will be sent to you by letter

Answer all questions. Time: 3 hours

I.

  1. A recent survey found that supermarkets in low income areas charge higher average prices than supermarkets in high income areas for many identical items. This is consistent with

_____(a) price discrimination in the sale of groceries

_____(b) no price discrimination

_____(c) lack of competition in the retail grocery market

_____(d) competition in the retail grocery market.

Check those that apply.

 

On the following questions, indicate whether True (T), False (F), or Uncertain (U), with brief explanation.

  1. A firm produces output xusing inputs a1 and a2, which it purchases competitively at prices p1 and p2. Its total cost is given by

C=A{{x}^{\gamma }}p_{1}^{{{a}_{1}}}p_{2}^{{{a}_{2}}}

where A, ?, a1, a2 are constants.

_____(a) The demand for the first factor is given by

{{a}_{1}}=\frac{\partial C}{\partial {{p}_{1}}}=\frac{{{\alpha }_{1}}C}{{{p}_{1}}}

_____(b) The production process of the firm exhibits constant returns to scale.

_____(c) The above cost function corresponds to a Cobb-Douglas production function.

 

  1. Consider a price system involving four commodities, q1, q2, q3, and q4. If the goods are gross substitutes, it can be shown that the equilibrium will

_____(a) Satisfy the Hicks conditions of perfect stability, and

_____(b) Be dynamically stable.

Assume demand shifts from the first commodity to the second commodity. Again, assuming that the commodities are gross substitutes, it can then be demonstrated that:

_____(c) P1/P2falls and P3/P4remains unchanged;

_____(d) P2/P3rises and P1/P4falls;

_____(e) P3/P1rises by a smaller proportion than P2/P1.

 

_____ 4. If the consumer’s utility function is separable, then his marginal utility must be declining for all goods.

_____ 5. In a two good world, consumer indifference curves must be everywhere convex to the origin. Otherwise there is no solution to the consumer’s problem of maximizing his satisfaction subject to his budget constraint.

_____ 6. Three top executives leave company A and join company B. The price of company A’s stock falls and the price of company B’s stock rises. This proves that the executives are being exploited.

 

II.

In Ronald Coase’s celebrated article on the nature of social cost the first example concerns the externality imposed by a cattle ranch that is next to a corn farm. The cattle can wander into the corn farm and eat some of the corn. This increases cost to the corn farmer and imposes an externality on him. Construct a formal analysis of the following situation:

(i) Let there be two firms such that the output of each firm is an “input” in the production function of the other. Let the other inputs be of the same kind, say, labor and capital. Let the output prices be given and let the input prices be given. Derive the profit maximizing solution for the two firms.

(ii) Give a precise measure of the externality and show that the solution in (i) does not depend on who pays whom.

(iii) Under what conditions will the dollar amount of the externality be proportional to the output of the other firm?

 

III.

Consider an economy with two, L and K, factors of production producing goods, X and Y, under conditions of constant returns to scale. Assume that X is relatively L-intensive at all factor prices.

(a) Analyze the effect of an increase in L on the production of X and Y on the assumption that the relative price of X and Y is constant. How would the increase in L affect the share of L in the economy’s income?

(b) Analyze the effect of an increase in the relative price of X on relative and absolute factor rewards, and on the share of L in the economy’s income. Would your answer be altered if both production functions were of Cobb-Douglas type?

(c) Analyze the effect of an increase in K on the relative price of X on the assumption that neither X nor Y is inferior in the community’s consumption.

 

IV.

What effect would you expect the British devaluation of the pound from $2.80 to $2.40 to have had on the dollar price of Rolls Royce cars? Justify your conclusion, preferably by diagrams describing the position of the company, indicating explicitly any assumptions you regard as relevant. Assume that wage rates in Britain in pounds are not affected by the devaluation.

 

V.

The difference between the price of foreign crude oil and the price of domestic crude oil (landed at the same U.S. port) times the quantity of oil consumed in the U.S. is roughly $5 billion. This has been cited as an estimate of the cost to the U.S., in terms of wasted resources, of the whole set of governmental measures special to oil (oil import quotas, percentage depletion allowances, prorationing of oil, etc.). Indicate as specifically as you can the defects, if any, in this measure, and the information needed to set a dollar value on each defect.

 

Source:  Hoover Institution Archives. Papers of Milton Friedman, Box 77, Folder 8 “University of Chicago , Econ 331”.

Image Source: Lecture Hall 1, Social Science Research Building. University of Chicago Photographic Archive, apf2-07482, Special Collections Research Center, University of Chicago Library.

Categories
Chicago Exam Questions Suggested Reading Syllabus

Chicago. Undergraduate International Monetary Affairs. Metzler, 1962

 

It is interesting to see that University of Chicago economics undergraduates in 1962 were still expected to learn something about mercantilism and classical international economic theory with a dash of Friedrich List as a chaser in Lloyd Metzler’s course on international monetary relations and policies. Oh yes, and Alfred Marshall gets into the act as well! 

_____________________

Lloyd A. Metzler

ECONOMICS 271
Reading List
Winter, 1962

  1. Mercantilism and the Classical Theory of Comparative Advantage.

P. T. Ellsworth, The International Economy, Revised Edition, chapter 2.
Eli Heckscher, “Mercantilism,” in Encyclopaedia of the Social Sciences, Vol. X.
David Ricardo, Principles of Political Economy and Taxation, chapter 7.
John Stuart Mill, Essays on Some Unsettled Questions in Political Economy, Essay 1.

  1. Mechanism of the Foreign Exchange Market.

Alan R. Holmes, The New York Foreign Exchange Market, Federal Reserve Bank of New York, March 1959.
P. T. Ellsworth, The International Economy, Revised Edition, chapter 15.
Frank A. Southard, Jr., Foreign Exchange Practice and Policy.
Peter B. Kenen, Giant among Nations, Harcourt Brace, 1958.

  1. National Income and the Balance of Payments.

J. E. Meade, The Theory of International Economic Policy, Vol. I, The Balance of Payments, Oxford University Press, Part I.
U.S. Department of Commerce, U.S. Income and Output, 1958.
R. F. Bennett, “Significance of International Transactions in National Income,” in Studies in Income and Wealth, Vol. VI, National Bureau of Economic Research.
Alfred Marshall, Money, Credit, and Commerce, Book III, chapters 1-4.

  1. Postwar Monetary Developments.

Randall Hinshaw, “Toward Currency Convertibility,” Princeton University, Essays in International Finance, No. 31, 1958.
Robert Triffin, Europe and the Money Muddle, Yale University Press, 1957.
Alice Bourneuf and E. A. Goldenweiser, “The Bretton Woods Agreements,” Federal Reserve Bulletin, September 1944.

  1. Regional Monetary Arrangements.

Jacob Viner, The Customs Union Issue, Chapter 4.
Committee for Economic Development, The European Common Market and its Meaning to the United States, CED, May, 1959.
James E. Meade, Problems of Economic Union, University of Chicago Press, 1953.

  1. Undeveloped Areas and the Theory of Economic Growth.

Friedrich List, A National System of Political Economy.
Walter W. Rostow, The Process of Economic Growth, chapters 1-4.
Colin Clark, Conditions of Economic Progress, chapters 2, 3, 4, 11.
Aldous Huxley, Brave New World Revisited, chapter 1.
A. J. Brown, Introduction to the World Economy, chapters 1-4, chapter 6.

 

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archive. Lloyd Appleton Metzler Papers, Box 9, Folder “271 Class Notes. Win. ‘62”.

_____________________

L. A. Metzler

ECONOMICS 271
COURSE EXAMINATION
Winter, 1962

(1) Outline the principal policies of mercantilist economics and show how these policies were justified as being in the national interest of the country concerned.

(2) How were the mercantilist doctrines refuted by the classical economists, particularly by Ricardo and Mill?

(3) Did the classical economists establish a case for universal free trade? Explain.

(4) What are the main features of an undeveloped or backward country and how can the obstacles to economic development be overcome?

(5) How do you account for the decline in public interest in Malthus’ doctrine of population during the middle of the nineteenth century? What explains the recent revival of interest?

(6) Suppose that England, France and the United States have flexible exchange and that, at a given moment of time, these rates are:

New York—London: $4 = £1.
New York—Paris: $0.25 = F. 1
London—Paris: F12 = £1

If an arbitrageur has bank balances in all these countries, show how he can operate in such a way as to leave all of his foreign balances unchanged and at the same time increase his domestic balances. What effect will these operations have on all three rates?

(7) Demonstrate the conditions under which devaluation will improve a country’s balance of trade. In doing this you should define the balance of trade in both domestic and foreign currencies.

 

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archive. Lloyd Appleton Metzler Papers, Box 9, Folder “Course Exams 270-271”.

Source Image: Posting by Margie Metzler on the Metzler Family Tree at the genealogical website, ancestry.com.

Categories
Exam Questions Johns Hopkins

Johns Hopkins. Mid-year and End-year final exams for business cycles. Domar, 1948-49

 

Copies of the examinations for Evsey Domar’s business cycles course at Johns Hopkins University offered during the 1948-49 academic year can be found in his papers at the Economists’ Papers Archives at Duke University but also in the archived collection of economics exams in the departmental papers at the Johns Hopkins archive. While Domar was fairly reliable in keeping copies of his course outlines and exams, I have yet to discover a course outline for any year. Perhaps he lent his sole copy to a colleague once?

Three sets of examination questions for 1951, 1952, and 1954 are also posted.

____________________

Course Announcement

Business Cycles 617-618. Associate Professor Domar. Two hours weekly through the year.

Statistical descriptions of fluctuations in economic activities and a systematic survey of past and present cycle theory.

 

Source: Catalogue Number of The College of Arts and Sciences; The School of Engineering; The School of Business in Johns Hopkins University Circular. New Series 1948, Number 3. Whole Number 579 (March, 1948) p. 85.

____________________

THE JOHNS HOPKINS UNIVERSITY
FINAL EXAMINATION

Economics 617
Dr. Domar

Wednesday, January 26, 1949—9 a.m. Three hours

ANSWER ALL QUESTIONS. THEY CARRY EQUAL WEIGHTS. I AM MOST INTERESTED IN YOUR REASONING.

I.

In the last days of the OPA, it was emphatically asserted by various quarters that the best cure against inflation lay in increased production. Assume than an increase in output was actually possible. Would not increased production, however, result in larger money incomes and thus produce an inflationary effect, or at least counteract the deflationary effect of the increase in output?
Analyse this problem. The quality and depth of your analysis will count more than its quantity.

 

II.

Mr. Ayzenshtadt, whose paper was read in class, has this to say about Keynes’ system:

“Even the greatest admirers of Keynes and of this theory that loan capital is the main propeller of the industrial cycle, do not see anything new in it….Keynes himself thinks that the ‘novelty’ of his system lies in the equilibrium formula of the economic process, in which the independent and dependent variables are arranged as follows:

Independent variables

  1. Propensity to consume
  2. Marginal efficiency of capital
  3. Rate of interest
  4. Liquidity preference

Dependent variables

  1. Saving
  2. Investment
  3. Level of employment.”

Comment. Be specific.

 

III.

“In spite of his claims to the contrary, Keynes did not succeed in proving the possibility of underemployment equilibrium if wages and prices were assumed to be flexible. That a long period of unemployment could persist as a result of wage and price rigidity we had known long before Keynes.”

Comment on this statement and show what effects would flexible prices and wages have on elimination of unemployment (in a depression) and stabilization of the price level (in an inflation). Indicate clearly every step in your analysis. What practical recommendations follow from your discussion?

 

IV.

Write for thirty – forty minutes on any subject covered in the course which is of interest to you, but is not included in the preceding questions and not studied in your term paper. Make sure you have something worthwhile to say.

*  * *  *  *

The Johns Hopkins University
Final Examination

Economics 618
Dr. E. D. Domar

May 25, 1949. Three hours

Answer all questions. They carry equal weight.

I.

The following statement appeared in the National City Bank Monthly Letter (Jan. 1944) regarding government spending as a means of raising the level of income and employment:

“Government spending tends to be like a drug, in that it takes larger and larger doses to get result, and all the time debt and taxes get higher and higher.”

            Can a somewhat similar statement be made regarding private investment as an instrument for achieving and maintaining a high level of employment? Discuss the problem thoroughly.

 

II.

Examine the monetary equations (Nos. 3.10, 3.11, 3.12 in Klein’s Model III. (You should have his paper with you.)

[Klein, Lawrence R. “The Use of Econometric Models as a Guide to Economic Policy.” Econometrica 15, no. 2 (1947): 111-51. ]

  1. Give a thorough analysis of their meaning and structure.
  2. Explain the function which they perform or are supposed to perform in the system taken as a whole.
  3. State your criticism of them and present your positive suggestions.

 

III.

A Congressional Committee is holding hearing to determine (a) the causes of depressions and, (b) the methods for their elimination. Mr. Hayek and Mr. Marx are testifying. (You may use Mr. Paul Sweezy instead of Mr. Marx if you don’t want to get involved with ghosts).

Present:

  1. A brief statement of each witness’ views on points (a) and (b).
  2. Your criticism and evaluation of these statemtns.
  3. Your own statements on points (a) and (b).

Make sure that your position is well taken because both the witnesses and the members of the Committee (not to say anything about your instructor) can attack you on any point. Be precise and specific.

 

IV.

Evaluate critically the present day business cycles theory and research. Present your positive suggestions for their improvement. In what direction should the study of business cycles, in your opinion, develop? Be specific.

 

Source:     Duke University. David M. Rubinstein Rare Book and Manuscript Library, Economists’ Papers Archive. Evsey Domar papers, Box 16, Folder “Final Exams: Johns Hopkins, Stanford, U of Michigan”.

Image Source: College yearbook portrait of Evsey [Domashevitsky] Domar from the 1939 UCLA yearbook.

Categories
Economists Exam Questions M.I.T. Suggested Reading Syllabus

M.I.T. Advanced Economic Theory. Uncertainty and Capital Theory. Readings and Exam. Solow, 1965

 

Topics in advanced economic theory in 1965 was taught at M.I.T. by Robert Solow. The topics discussed were uncertainty and capital theory. This post provides information that was found stored in three different folders in Robert Solow’s papers at the Economists’ Papers Archive at Duke University. Together in one place we now have the reading lists for the topics, the final exam questions and even the class list. For the little it is worth knowing, Robert Hall of Stanford and William Nordhaus of Yale were awarded A’s in the course. I certainly hope that their scientific reputations will not be affected by that revelation.

____________________

Spring 1965

14.192 Advanced Economic Theory
I. Economics of Uncertainty

K. Arrow, “Alternative Approaches…,” Econometrica, October 1951.
D. Bernoulli, “Exposition of a New Theory…,” Econometrica, January 1954.
M. Friedman and L. J. Savage, “Utility Analysis…,” JPE, August, 1948, also in Readings in Price Theory.
H. Markowitz, “The Utility of Wealth,” JPE, April, 1952.
I. Herstein and J. Milnor, “An Axiomatic Approach…,” Econometrica, April, 1953.
J. Pratt, “Risk Aversion…,” Econometrica, January-April 1964.
H. Latané, “Criteria for Choice Among Risky Ventures,” JPE, April, 1959.
J. Tobin, “Liquidity Preference…,” Rev. of Econ. Stud., February, 1958.
K. Arrow, “The Role of Securities…,” Rev. of Econ. Stud., April, 1964.
J. Hirschleifer, “Efficient Allocation…,” AER, May, 1964, 77-96 (including relevant discussion)
K. Arrow, “Uncertainty and the Economics of Medical Care,” AER, December, 1963.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archives. Robert M. Solow papers, Box 68, Folder “Reading Lists”.

____________________

Spring 1965

14.192 Advanced Economic Theory
Reading List on Capital Theory

I. Fisher: Theory of Interest, passim.
K. Wicksell: Lectures on Political Economy, Vol. I, Part II and Appendix on Akerman.
O. Lange: “the Place of Interest…”, Rev. of Econ. Studies, 1935-1936.
L. Metzler: “Rate of Interest and…”, JPE 1950, “Corrections”, JPE 1951.
P. Samuelson: “Some Aspects of the Pure Theory…”, QJE 1937
___________: “Rate of Interest under Ideal Conditions”, QJE 1939.
T. Koopmans: Three Essays on the State of Economics, pp. 105-126.
R. Radner: Notes on the Theory of Economic Planning.
E. Malinvaud: “The Analogy between…”, Rev. of Econ. Studies, 1961.
R. Solow: “Substitution and Fixed Proportions…”, Rev. of Econ. Studies, June 1962
________:  Capital Theory and the Rate of Return, Chapters 1, 2.
E. Phelps: “Substitution, Fixed Proportions,….”, International Economic Review, September 1963.
K. Arrow: “…Learning by Doing”, Rev. of Econ. Studies, June 1962.
R. Findlay: “The Robinsonian Model…”, Economica, February 1963 and “Comments” by Robinson and Findlay, Economica, November 1963.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archives. Robert M. Solow papers, Box 67, Folder “14.192 Capital Theory”.

____________________

Final Examination
14.192 Advanced Economic Theory
Spring 1965

  1. Suppose Caius, a Petersburg merchant, has purchased commodities in Amsterdam which he could sell for 10,000 rubles if he had them in Petersburg. He therefore orders them to be shipped by sea, but is in doubt whether to insure them. He is well aware that at this time of year, of 100 ships which sail from Amsterdam to Petersburg, 5 are usually lost. How much wealth must Caius possess apart from the goods under consideration in order that it be sensible for him to abstain from insuring the shipment at a price of 800 rubles? And what fortune should be possessed by the man who offers to provide this insurance in order for him to be rational in doing so? Work out for an arbitrary utility function and specialize to the logarithmic case.
  2. In a perfectly competitive economy, it requires c (X) many years of labor, and nothing else, to build a machine which requires X men to operate it and has a capacity of one unit of output a year. The wage in terms of output is w and is expected to be constant forever. The market rate of interest is r, also constant. For given w, find the competitive equilibrium values of x and r. How does x change with w?
  3. By investing one unit of labor now (at real wage w) you can start a yoghurt-process. T units of time later, by investing one more unit of labor you can collect f (T) units yoghurt and start another identical yoghurt-process. There is a competitive capital market. You intend this yoghurt business to go on forever at the scale of one process. Discuss the determination of the best T, and implications for r and w.
  4. An investor with wealth W must divide it between holding cash, M, and holding one-year bonds in value B, paying interest at rate r. The return of principal is sure but the interest rate is random. Interest income is subject to a proportional tax at rate t. If the investor is a Bernoullian expected-utility maximizer and a risk-averter, how will his holding of bonds respond to a change in the tax rate? Explain the economics of your answer.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archives. Robert M. Solow papers, Box 68, Folder “Examinations and Quizzes”.

____________________

From the Final Grade Sheet

Second Term 1964-65
Subject number: 14.192
Subject name: Economics Seminar
Staff member in charge: [signed] R. M. Solow

Graduate students of economics who were awarded grades
[There were 5 A’s and 7 B’s]:

Bing, Peter C.
Bischoff, Charles W.
Blackburn, Anthony J.
Carter, D. Nicholas G.
Hall, Robert E.
Havens, John J. Jr.
Kamiya, Denzo [Emeritus Professor,Keio Univ.]
Kheir El Dine, H. Miss
Mazur, Michael P.
Moskowitz, Warren E.
Nordhaus, William D.
Schulson, Louis J.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archives. Robert M. Solow papers, Box 68, Folder “Examinations and Quizzes”.

____________________

(Preliminary) Class List

14.192 ADVANCED ECONOMIC THEORY
W 1:00-3:00
Professor Robert M. Solow

Bing, Peter C.
Bischoff, Charles W.
Blackburn, Anthony J.
Carter, D. Nicholas G.
Chacholiades, Miltiades  LISTENER
DeMenil, George F. DROPPED APRIL 13, 1965
Hall, Robert E.
Havens, John J. Jr.
Kamiya, Denzo
Kheir El Dine, H.
Mazur, Michael P.
Moskowitz, Warren E.
Schulson, Louis J.
Suva, Felipe
Wales, Terrence J. LISTENER
Cohen, Malcolm S. LISTENER
Stiglitz, Joseph
La Malfa, Giorgio LISTENER

Note:  William Nordhaus who received a grade in the course was not included in this preliminary class list. Felipe Suva and Joseph Stiglitz appear on this list but were not included in the gradesheet.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library, Economists’ Papers Archives. Robert M. Solow papers, Box 68, Folder “Reading Lists”.

Image Source:  Robert Merton Solow at the M.I.T. Museum website.

Categories
Exam Questions Harvard

Harvard. International Trade and Finance. Final Exam. Leontief, 1933

 

 

Wassily Leontief’s first appointment at Harvard was at the rank of instructor for the academic year 1932-33. The first course he taught was Economics 18 (Price Analysis) that was taken by two graduate students for credit during the fall semester. Leontief then taught Economics 39 (International Trade and Finance) in the second semester. I have yet to locate a syllabus or reading list for that course, but at least Economics in the Rear-view Mirror is able to provide visitors with the transcript below of what would appear to be Leontief’s earliest recorded examination at Harvard.

_________________

Course Description

[Economics] 39 2hf. International Trade and Finance

Half-course (second half-year). Mon., Wed., Fri. at 3. Dr. Leontief.

Starting with the classical theory of foreign trade, this course will lead to an analysis of modern problems in international economic relations. The movement of capital and labor across national boundaries will be discussed and the general trend in international economic relations and policies will be analyzed in connection with the changing structure of world economies.

Source:  Division of History, Government and Economics, 1932-33. Official Register of Harvard University, Vol. 29, No. 32 (June 27, 1932), pp. 81-82.

_________________

Course Enrollment

[Economics 39 2hf. Dr. Leontief.—International Trade and Finance.

Total 11: 9 Graduates, 2 Radcliffe.

Source:  Harvard University. Report of the President of Harvard College for 1932-1933, p. 66.

_________________

Final Examination

1932-33
HARVARD UNIVERSITY
ECONOMICS 392

(Three hours)

  1. Analyze the theory of costs in its application to the theory of international trade.
  2. “England was losing after the war its exports to other countries because its costs of production were too high.” Is this statement compatible with the theory of comparative costs? Analyze the case.
  3. Can a tariff protect the wage-level of a country?
  4. Under what conditions can a country gain from a protective tariff?
  5. What is dumping? Under what conditions is it most likely to occur?
  6. Analyze the principal items of a typical balance of payments.

Final. 1933.

Source: Harvard University Archives. Harvard University Examination Papers. Finals. (HUC 7000.28 vol. 75). Papers Printed for Final Examinations: History, History of Religions,…, Economics,…, Military Science, Naval Science January-June, 1933.

Image Source: Wassily Leontief in Harvard Class Album, 1934.

 

 

Categories
Exam Questions Harvard Suggested Reading Syllabus

Harvard. Principles of Economics, Summer School. Syllabus and Exams, 1942.

Harvard Commencement, 1943. Military copy work from the Harvard ArchivesHarvard University. . Kris Snibbe/Harvard Staff Photographer

 

 

Harvard University was able to switch into a three semester per year mode in the very first summer after the U.S. entered World War II. There were two versions of the standard Principles of Economics course offered, one which extended over the twelve week summer term and one very intensive version that covered the material of a normal year-long course in just six weeks by having the students in class for two hours per days for five days per week. There was also a Principles “Lite” version that ran for only six weeks and covered just half the material apparently.

The syllabus for the full twelve week version of Economics A lists 2,600 pages of assigned reading for the  course. Nominally there would be five one-hour sessions per week, so on average for the sixty sessions students were expected to read 40-45 pages per day. Call me cynical, but I would be surprised if the average of the distribution were even half that pensum.

____________________

Summer enrollment in Principles of Economics, 1942

“The large number of course enrolments meant that individual classes were very much larger than in preceding years. The largest classes were Mathematics SAa, with 436 students, English SAa, with 347, English SAb, with 329, Mathematics SAb, with 299, and Economics SAa, with 222 students. Enrolment in 22 courses was 100 or more.”

Source:  Harvard University. Report of the President of Harvard College for 1941-1942, p. 356.

___________________

Course Announcements for Summer School 1942 

Economics SAa 1hf. Principles of Economics.
Half-course (first session). Mon. through Fri., at 11. Professor Burbank, and other members of the Department.

Economics SAa may be taken by properly qualified Freshmen with the consent of the instructor.
SAa and SAb provide an introductory study of the present organization of industry, money and the mechanism of exchange, the theory of value, foreign trade and tariff policy, the distribution of wealth; i.e., the forces governing the incomes of the laboring, land-owning, capitalist and business classes, and the relation of government to industry. The course is conducted entirely by oral discussion.

 

Economics SAb 2hf.Principles of Economics
Half-course (second session). Mon. through Fri., at 11. Professor Chamberlin, and other members of the Department.

Economics SAb may be taken by properly qualified Freshmen with the consent of the instructor.
Economics SAa is a prerequisite for the course.
For description see SAa.

 

Economics SA1(to count as a whole course in the first session). Principles of Economics
Whole course (first session). Mon. through Fri., 9 to 11.  Professor Burbank, and other members of the Department.

Economics SA1 is identical with SAa and Sab, the two, however, combined and completed in one session. Freshmen will not be admitted to this course. For description see SAa.

 

Economics SB 1hf. Principles of Economics
Half-course (first session). Mon. through Fri., at 11. Dr. Monroe.

If a Harvard student counts Economics SB for a degree, Economics A may be counted as a half-course only. Ordinarily students concentrating in History, Government, and Economics must take Economics A, SA, or SAa and SAb.
Course SB gives a general introduction to economic study, and a general view of Economics for those who have not further time to give to the subject.

 

Source:   Final Announcement of the Courses of Instruction offered in the Summer Term 1942 published in Official Register of Harvard University, Vol. 39, No. 16 (April 20, 1942), pp. 21-22.

____________________

ECONOMICS A
Summer Term, 1942

Sources: Arnold, Thurman The Bottlenecks of Business (1940)

*

 Benham and Lutz Economics, American Edition (1941)
Bidwell, P. Economic Defense of Latin America (1941)

**

 Federal Reserve System Federal Reserve Charts on Bank Credit, Money Rates and Business (1941)
Garver and Hansen Principles of Economics, Revised Edition (1937)
Golden and Ruttenberg The Dynamics of Industrial Democracy (1942)
Johnson, E.A.J. Some Origins of the Modern Economic World (1936)

**

 Luthringer, Chandler and Cline Money, Credit and Finance (1938)
Meyers, A.L. Elements of Modern Economics (1937)

**

 Neal, A.C., Editor Introduction to War Economics (1942)
Slichter, S.E. Modern Economic Society (1928)

-ditto-

 The Economics of Collective Bargaining (reprint)

-ditto-

 The Period 1919-1936 in the United States, Its Significance for Business Cycle Theory, in Review of Economic Statistics, Vol. XIX, Feb. 1937, No. 1, Part I

**

 Staff members Syllabus: Economics A
Taussig, F.W. Principles of Economics, Vol. I Third Edition Revised (1921)

**

 Taylor, H. Main Currents in Modern Economic Life (1941)
T.N.E.C. Price Behavior and Business Policy, Monograph No. 1 (1941)
T.N.E.C. Competition and Monopoly in American Industry, Monograph No. 21 (1940)

** To be purchased by students
* Suggested for purchase

Note:  Essay due at end of eight week.

 

ECONOMICS A
Outline and Reading Assignments
Summer Term, 1942

 

Weeks Pages
1st Part I. EMERGENCE OF MODERN ECONOMIC INSTITUTIONS
The economic problem; historical development of social and legal institutions; their effect on the economic problem.
Johnson,  Ch. 1, Economic Activity and Economic Development 7
_______, Ch. 2, The Late-Medieval Background 21
_______, Ch. 3, The Emergence of Capitalism 34
_______, Ch. 4, The Beginnings of Scientific Technology 32
_______, Ch. 5, The Formulation of Capitalist Theory 23
_______, Ch. 6, Protection and the Transplantation of Industrialism 24
_______, Ch. 7, The Export of Capital and the Genesis of Economic Imperialism 15
156
Part II. MODERN ECONOMIC INSTITUTIONS
A—The economic problem again; how it is solved today; the concept of useful production.
Benham, Ch. 1, General Survey 17
Taussig, Ch. 2, Of Labor in Production 13
30
B—Description of money flows and goods flows in a capitalist society; the relation of the division of labor to these flows; the forms of business organization and their relation to the division of labor.
Taylor, Ch. 6, Vol. I, The National Income and its Distribution 18
2nd _______, Ch. 12, Vol. I, Industrial Techniques 16
Taussig, Ch. 3, Division of Labor 18
_______, Ch. 4, Large Scale Production 15
Slichter, Ch. 8, (M.E.S.) Modern Business Organization 26
93
Part III. THE DIVISION OF LABOR AND MONEY
Division of Labor necessitates exchange; exchange is facilitated by the use of money; digression to explain the working of the monetary system in the United States.
Luthringer, Ch. 1, Functions and Significance of Money 24
_______, Ch. 2, Kinds of Money 23
_______, Ch. 3, Credit and Credit Instruments 15
_______, Ch. 4, Investment Institutions and Commercial Banking 23
Pamphlet, Credit Expansion, in Economics A Syllabus 14
Luthringer, Ch. 5, Central Banking and the Federal Reserve System 20
_______, Ch. 6, The Quantitative Control of Bank Credit 18
3rd _______, Ch. 7, Meaning of the Value of Money 14
_______, Ch. 8, Equation of Exchange and the Quantity of Money 16
_______, Ch. 9, Velocity of Money and the Volume of Trade 17
184
Part IV. THE SOLUTION TO THE ECONOMIC PROBLEM
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 A—The Markets for Commodities
Analysis in this section refers only to the determination of prices and quantities of commodities produced by a business firm. No answers are given to the questions: Why are wages, rents, interest high or low?
A.1 The Business Firm vis-à-vis Consumers in an unregulated market
A.1.a Consumer Demand
Why consumers spend their incomes as they do, the process whereby consumer demand is transmitted to the market.
Benham, Ch. 2, Markets 25
_______, Ch. 3, Demand 16
_______, Ch. 4, Prices with a Fixed Demand 10
_______, Ch. 5, Changes in Demand 10
61
A.1.b The Business Firm
The final relationship of cost to price depends on the competitive conditions in each commodity market; the profit motive the main determinant of the firm’s decisions.
Benham, Ch. 12, The Controlling Power of Demand 8
_______, Ch. 13, The Problems of the Firm (omit Sec. 11) 37
_______, Ch. 14, Monopoly 18
Monograph 21, Ch. 1, the Nature and Significance of Competition 18
Monograph 1, Part 1, Ch. 2, Nonprice Competition 53
4th _______, 1, Part 2, Ch. 1, Types of Geographical Price Structures 14
148
A.2 Effect of Government Regulation on the unregulated market
A.2.a Introduction
General analysis of regulation and impediments to free markets. Sections b, c, and d elaborate more completely some issues presented here.
Arnold, Ch. 1, The Basic Problem of Distribution 19
_______, Ch. 2, How Restraints of Trade Affect your Standard of Living 25
_______, Ch. 3, How Restraints of Trade Unbalance the National Budget 13
_______, Ch. 4, A Free market in time of National Emergency or War 30
_______, Ch. 5, An Elastic Procedure…to Prevent…Seizure of…Power… 24
_______, Appendix I and II 20
_______, Ch. 6, The Test is Efficiency and Service—not size 15
_______, Ch. 7, Procedure Under the Sherman Act… 31
5th _______, Ch. 8, The Clarification of Law through public enforcement 26
_______, Ch. 9, Antitrust Enforcement for the Betterment of the Consumer 21
_______, Ch. 10, Bottlenecks between the Farm and the Table 26
_______, Ch. 11, Labor—Restraints of Trade among the Underdogs 19
_______, Ch. 12, The Rise of a Consumer Movement 37
306
A.2.b Regulation and the Consumer
Taylor, Vol. II, Ch. 37, Consumption Standards 15
____________, Ch. 38, Consumers and the Business System 19
____________, Ch. 39, Consumer Cooperation 20
54
6th A.2.c Regulation and the Business Firm
(1) Monopoly
Taylor, Vol. I, Ch. 15, The Growth of Big Business 18
___________, Ch. 16, The Trend Toward Monopoly 17
___________, Ch. 17, Monopolies and Public Policy 16
51
(2) Public Utilities
Techniques of regulation different for firms classified as public utilities; the TVA—an example of a new regulatory device.
Taylor, Vol. II, Sec. 13, pp. 363-364 Introduction 2
____________, Ch. 48, The Nature and Scope of Public Regulation 15
___________, Ch. 49, The Price of Utility Services 16
___________, Ch. 50, Recent Expansion of Federal Control 19
___________, Ch. 51, The State as Operator 17
69
A.2.d Agriculture—a special problem
Taylor, Vol. II, Sec. 8, Agriculture and the Market 3
____________, Ch. 30, The American Farmers 18
____________, Ch. 31, Farmers in the Market System 19
____________, Ch. 32, Agriculture and Public Policy 24
64
7th B. The Markets for Productive Agents (Factors of Production)
The Analysis in this section refers to the determination of the prices of the factors of production, land, labor, capital and entrepreneurship in the markets where they are bought and sold. The entrepreneur’s reward, profit, is decided for him by the success or failure of his production plan. This market is, of course, not independent of the commodity markets. The unclassified reading discusses the productive agents of the United States:
Taylor, Vol. I, Ch. 8, How Productive Resources are Used 17
___________, Ch. 9, Population 19
___________, Ch. 10, Land 15
___________, Ch. 11 Localized Natural Resources 21
___________, Ch. 13 Capital 19
91
B.1 The Factors vis-à-vis Firms in an Unregulated Market
B.1.a. The Pricing Process in General
Benham, Ch. 9, Combination of Factors (omit sec’s 5,6) 18
Meyers, Ch. 11, The Distribution of Income 11
29
B.1.b. The Prices of Each Factor of Production
Benham, Ch. 15, The Mobility of Factors of Production 10
_______, Ch. 16, Wages, pp. 258-269 20
_______, Ch. 18, Rent 13
Garver and Hansen, Ch. 26, Interest 23
_______________, Ch. 27, Profits 12
78
8th B.2 Effects of Government Regulation and other Institutional Aspects of Distribution on the Markets for Factors.
B.2.a The Labor Market
Taylor, Vol. II, Ch. 33, The American Labor Market, pp. 75-89 14
___________, Ch. 35, The Labor Movement 24
Slichter (pamphlet). The Economics of Collective Bargaining 23
Taylor, Vol. II, Ch. 36, Public Policy Regarding Labor 22
Benham, Ch. 16, Wages, pp. 269-275 (section 9) 6
Golden, entire book. Write an essay of not more than 1200 words evaluating the ideas in the book. 347
436
9th B.2.b The Market for Savings
It is to be noted that firms and others may secure funds from credit created by commercial banks.
Taylor, Vol. I, Ch. 23, pp. 431-434 only (self financing by corporations) 4
__________, Ch. 24, Investment Credit Institutions 19
__________, Ch. 25, The Security Markets 17
__________, Ch. 26, Regulation of Securities and Exchanges 18
58
C. Public Finance and the Economic Problem
The State not only regulates markets as described above but also influences the prices of factors and commodities in the process of financing the production of public goods (roads, protection, etc.). The effects of government finance on the level of national income to be postponed to Part VI.
Luthringer,  Ch. 12, The Public Economy 13
_________, Ch. 13, The Revenue System 20
_________, Ch. 14, Tax Incidence 26
_________, Ch. 15, The Income Tax 20
_________, Ch. 16, Property and Other Taxes 18
_________, Ch. 17, Public Credit 14
_________, Ch. 18, Principles of Public Credit 16
127
Part V. INTERNATIONAL ASPECTS OF MARKETS AND FINANCE
Analysis of international trade and finance; the free market and the regulated market. Previous analysis emphasized only domestic markets although the principle of international trade is applicable to regions within a country to some extent; Latin America and the War.
10th Benham,  Ch. 25, The Theory of International Trade 22
_______, Ch. 26, Balances of Payments 10
_______, Ch. 27, Free Exchange Rates 10
_______, Ch. 28, The Gold Standard 22
_______, Ch. 29, Exchange Control 8
_______, Ch. 30, Import Duties and Quotas 9
Bidwell, Ch. 1, War and the Monroe Doctrine 16
______, Ch. 2, Propaganda and Politics 13
______, Ch. 3, German Economic Penetration 12
______, Ch. 4, The Weapons of Economic Defense 33
______, Ch. 5, The Fallacy of Hemisphere Self-Sufficiency 14
169
Part VI. PROSPERITY AND DEPRESSION
Analysis of the reasons why all prices move together; why all factors tend to become unemployed—hence the emphasis on the movements of national income. Previously, the analysis of prices was chiefly concerned (with the exception of the value of money) with relative prices. Existence of international markets tends to spread the cyclical pattern.
A. Explanation and Verification of Business Cycle Theories
Benham, Ch. 7, The Volume of Production, pp. 113-125 13
Garver and Hansen, Ch. 21, Business Cycles 18
11th Benham, Ch. 20, Economic Progress and the Trade Cycle, pp. 347-356 9
Slichter, R.E.S., The Period 1919-1936 in the U.S. Its Significance for Business Cycle Theory 19
59
B. Governmental Policy and Business Cycles
Taylor, Vol. II,  Ch. 44, Deficit Spending 16
____________, Ch. 12, The State as Provider (Introduction) 2
____________, Ch. 45, Providing Minimum Needs 17
____________, Ch. 46, Social Security 19
____________, Ch. 47, Public Housing 17

71
Part VII. TOTALITARIAN ALTERNATIVES TO CAPITALISM
Analysis of the solution to the economic problem in totalitarian economic systems.
Taylor, Vol. II, Sec. 14, Totalitarian Alternatives to Free Markets (Introduction) 2
____________, Ch. 52, Economic Basis of Totalitarianism 16
____________, Ch. 53, The Soviet Economy 23
____________, Ch. 54, The Fascist Economy in Italy 19
____________, Ch. 55, The National Socialist Economy in Germany 20
80
12th Part VIII. THE ECONOMICS OF WAR
Neal,  Ch. 1, Basic Economic Problems of War 15
____, Ch. 2, Economic War Potential 23
____, Ch. 3, Problems of War Production 21
____, Ch. 4, War Labor Problems 25
____, Ch. 5, Financing the War Effort 19
____, Ch. 6, Financing the War Effort, Business Finance 27
____, Ch. 7, Wartime Management of the Monetary and Banking System 28
____, Ch. 8, The Control of Individual Prices 31
____, Ch. 9, Economic Warfare 20
____, Ch.10, Post-War International Economics 19
228

 

Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archives. Randall Hinshaw Papers, Box 1, Folder “Schoolwork, 1940s”.

____________________

Final examination first half of course

SUMMER SCHOOL OF HARVARD UNIVERSITY
[First Session. Summer, 1942]
ECONOMICS SAa

Part I

(One hour)

Write on BOTH of the following in this section:

  1. Analyze carefully the effects of the following on average cost, marginal cost, marginal revenue and price for the individual firm in the short run:
    1. A tax of ten cents per unit of output on a monopolist.
    2. A subsidy of ten cents per unit of output to firms in a purely competitive industry.
  2. Trace the repercussions on member bank reserve balances, Treasury deposits with the Federal Reserve System and reserves of the Federal Reserve System caused by:
    1. The purchase and sterilization of gold by the Treasury.
    2. The purchase of U.S. government bonds by the Federal Reserve System.
    3. A transference of Treasury deposits from the Federal Reserve System to member banks.

Part II

(Two hours)

Write on any FOUR of the following in this section:

  1. “Regulation of public utility rates may be effected by limiting charges to yield a fair return on a fair value of the property. This will result in prices comparable to competitive conditions. An alternative type of rate regulation may be accomplished by using as a ‘yardstick’ the rates which a government-owned plant could economically charge.”
    1. Does the use of the fair return formula approximate the price which would evolve in a competitive market for the same commodity?
    2. May the rates fixed by the Tennessee Valley Authority be used as a “yardstick” for privately-owned power companies?
  2. “There seems to be a common belief that banks, by some process of sleight of hand, contrive to create a multiple of the amount of money they receive. The truth is that they can lend not more, but less than the amount of money that comes into their hands.”
    Do you agree? Explain fully.
  3. “It is not size in itself that we want to destroy….What ought to be emphasized is…the evil of industries which are not efficient or do not pass (the gains from) efficiency on to consumers.” Arnold.
    Examine the consistency of this statement.
  4. Contrast carefully the industrial economic world of nineteenth century England with the industrial economic world of fourteenth century England.
  5. Write a letter to your congressman briefly explaining what you believe to be the basic American farm problems and critically evaluating the New Deal attempts to alleviate them.

Source:  Harvard University Archives. Department of Economics, Course reading lists, syllabi, and exams 1913-1992 (UA V 349.295.6), Box 1, Folder “Economics 1, Exams 1939-1962”.

____________________

Final examination second half of course

HARVARD UNIVERSITY
[Second Session. Summer, 1942]
ECONOMICS SAb

Part I

(One hour)

Write on BOTH of the questions in this section:

  1. “The main fiscal problem of the war is the diversion of a large share of the national income from the private economy to the public fisc for war purposes.” Outline and defend a plan of taxation and borrowing which in your opinion effectively will solve this problem.
  2. Analyze the effects of an increase in the supply of labor on (a) the remuneration of the various productive factors and (b) the changes in output of those industries whose costs are mainly labor and those whose costs are mainly capital.

Part II

(Two hours)

Write on any FOUR of the questions in this section:

  1. Write an essay on the topic of cyclical unemployment emphasizing (a) the processes by which full employment is supposed to be effected in a free enterprise economy and (b) the reasons why these processes have failed to operate.
  2. What controls are necessary for the orderly and equitable distribution of goods during war time in the markets for factors of production and the markets for consumers’ commodities? Indicate the results likely to follow from partial rather than complete controls in these two major groups of markets.
  3. “Labor unions cannot raise the wages of labor within an occupation without reducing the number employed in that occupation since the entrepreneur cannot afford to pay labor more than the value of its marginal product.” Do you agree? Explain fully.
  4. Discuss carefully three methods of correcting an adverse balance of payments. Indicate the effects of each method on the level of domestic money incomes, the foreign exchange rate, merchandise exports and imports and short-term capital movements.
  5. Explain the chief methods of regulating securities markets in the United States. State concisely the functions of securities markets and evaluate the success of regulation in aiding the orderly functioning of these markets.

Source:  Harvard University Archives. Department of Economics, Course reading lists, syllabi, and exams 1913-1992 (UA V 349.295.6), Box 1, Folder “Economics 1, Exams 1939-1962”.

____________________

Final Exam Intensive Course, First Session 1942

SUMMER SCHOOL OF HARVARD UNIVERSITY
[First Session. Summer, 1942]
ECONOMICS SA1

I

(One hour)

  1. Reply fully to the following questions:
    1. Which are the main problems confronting the economy of this country during the present war?
    2. What measures of economic policy would you propose to cope with them?

II

(About one half hour each)

  1. What are the effects of the practice of self-financing by corporations upon
    1. the rate of interest;
    2. the allocation of the nation’s resources;
    3. the prevalence of competition, or of monopoly, in the economy as a whole?
  2. Let a tax be imposed upon a monopolist and the amount due be determined by either of the following methods:
    1. a fixed percentage of his profits;
    2. a fixed money amount per unit of output;
    3. a fixed percentage of the total money value of his sales;
    4. a global fixed sum, independent of either output or sales.

In which of these cases will he be able to shift the tax forward? Prove your conclusions by a graphical analysis.

  1. Criticize the following statement carefully:
    “The average citizen is inclined to think that there is nothing at all which he himself can do to check inflation. He considers the anti-inflationary fight a task for Uncle Sam only and therefore urges control of prices and labor and the draining off of excessive purchasing power. Actually, the citizen himself can do a great deal, and the efforts of the government will be far less effective unless he does.
    “He can co-operate with the government by putting money in the bank and making it work for him, instead of drawing it out, letting it lie idle and exposing it to the danger of theft, fire and forgetfulness, He can pay his debts. He can discharge his mortgage more rapidly. He can make larger down payments on installment purchases than he has to. He can be more generous to poor relatives. He can see his oculist, dentist or family doctor more often, and pay cash. He can contribute more liberally to local and national charities. He can refuse to hoard goods. He can refrain from rushing to buy the very articles of which there is a shortage….” (The Boston Herald, July 28, 1942, p. 14)
  2. Trace the main effects that the abolition of the tariff on beef (one of the major export articles of Argentina) would, in peacetime, have upon the economies of the United States and of Argentina. Distinguish the short-run and the long-run consequences.

Source:  Harvard University Archives. Harvard University. Final examinations, 1853-2001. (HUC 7000.28) Box 6, Papers Printed for Summer Examinations First Session, August, 1942.

____________________

Final Examination for Principles of Economics “Lite”

SUMMER SCHOOL OF HARVARD UNIVERSITY
[First Session. Summer, 1942]
ECONOMICS SB

I

(About one hour)

  1. Write an essay on one of the following topics:
    1. Long-run value under competition,
    2. The rate of wages,
    3. Investment and interest,
    4. Profits

II

(Answer TWO questions from this group.)

  1. How should you expect the following to affect the selling price of a farm: an increase in population; a fall in the rate of interest; the opening of a new market for its products; a bad crop failure?
  2. Explain the meaning of the following terms and show how one of them enters into the explanation of economic phenomena: comparative advantage; bank reserves; the gold points; marginal revenue.
  3. What are the principal factors responsible for cyclical fluctuations in business activity?

III

(Answer TWO questions from this group.)

  1. Explain the nature and operation of the forces which cause variations in the purchasing power of the dollar.
  2. Outline the principal forms of unemployment and discuss one of them in some detail.
  3. Compare the advantages and disadvantages of the different methods available for financing a war.

Source:  Harvard University Archives. Harvard University. Final examinations, 1853-2001. (HUC 7000.28) Box 6, Papers Printed for Summer Examinations First Session, August, 1942.

Image Source: Harvard’s Commencement in 1943. From The Harvard Gazette, November 10, 2011.