Tag: Friedman

Preliminary Exam (Economic Theory) 1957

Preliminary Exam (Economic Theory, Old Rules) 1960

Preliminary Exam (Income, Employment and Price Level) 1967

Preliminary Exam (History of Economic Thought) 1989

___________________________

[Handwritten note, top of page: “Mr Friedman”]

MONEY AND BANKING
Preliminary Examination for the Ph.D. and A.M. Degrees
Summer, 1967

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—ALL QUESTIONS HAVE EQUAL WEIGHT

1. a) “The fallacy in the quantity theory of money is that it allows for the circulation of money but not the circulation of goods. A correct theory would have a velocity of circulation of goods to parallel the velocity of circulation of money.” Discuss.

b) According to one writer, one of the “fundamental laws of economics” is that “the inflation rate is approximately equal to the interest rate when averaged over several decades.”
(Andre Gleyzal, “Theory of Money in a Free Economic System.” Discuss (and do not dismiss out of hand).

2. a) What is the “Phillips Curve”?

b) Give the theoretical analysis on which it rests. Do you regard it as valid? If so, defend it; if not, why not?

c) What is its relation to the notion of a “trade-off” between unemployment and inflation?

d) What is your understanding of the present state of the empirical evidence on the Phillips curve?

3. a) Expand the standard analysis of the IS-LM (or EEL) curves to include foreign trade and the balance of payments when all economies are operating with fixed exchange rates under a pure gold standard.

b) Would this analysis be any different under

i) fixed exchange rates with national currency standards?
ii) floating exchange rates?

Why, or why not?

4. a) A once and for all change in the money supply is expected to affect only the price level and not any real economic magnitudes. Yet some economic theorists who accept the neutrality of money in this sense argue that a sudden decrease (say) in the money supply will cause unemployment. How do you reconcile these two positions?

b) Assume that a country is operating on a classical gold standard. It has a central bank but the bank does not engage in open market operations. It confines its policy to setting an interest rate (discount rate) at which it lends freely. Let important gold discoveries be made in that country such that, at the prevailing price of gold, the rate of gold production increases. Does the neutrality of money still hold true in the long run? Will the increased rate of gold production affect only the price level and not the level of real income in the given country?

5. Most empirical studies of the demand for money that use time series data take the real stock of money as the dependent variable and take measures of real income or wealth and of the interest rate as explanatory variables. However, most monetary theorists treat the nominal stock of money as exogeneous. This appears inconsistent with the empirical work. Can you describe a sensible economic model to defend the choice made by the empirical investigators? Assume it is your purpose to predict the increase in the demand for real money balances resulting from an increase in real income. For simplicity, assume that current real measured income is the relevant income variable. Do not discuss the econometric theory of identification, etc. Focus your attention on the economic hypotheses in terms of the price level, the nominal money stock, interest rates, and nominal income. Would it be better to treat real money balances as an explanatory instead of as a dependent variable in estimating the demand for money?

6. Comment on the following proposition:

In the portfolios of banks, private loans and government bonds are alternatives. The smaller the quantity of loans that banks make (i.e., the tighter the supply of bank credit), the greater must be the quantity of government bonds the banks are holding in their portfolios. But the total supply of government bonds is fixed, and so this implies that the tighter is bank credit, the smaller the supply of government bonds available to the non-bank public to hold in their portfolios. But the smaller the quantity of government bonds available to the non-bank public, the greater the quantity of other assets they will hold. In other words, the tighter is bank credit, the greater the supply of private credit from non-bank holders of wealth, and the portfolio behavior of banks is largely irrelevant in determining the total supply of private credit.

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

Image Source: “Money Talks” from the cover of Puck, Vol LX, No. 1541 (September 12, 1906). Library of Congress Prints and Photographs Division Washington, D.C. “William Randolph Hearst sitting with two large, animated, money bags resting on his lap, with arms and legs, and showing two large coins as heads; on the floor next to Hearst is a box labeled ‘WRH Ventriloquist’.”

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Chicago Exam Questions

Chicago. Preliminary Exam for PhD, Theory of Income, Employment and Price Level, 1967

Post author By Irwin Collier
Post date 2020-07-07

Element from Social Science Research Bldg at U of Chicago

The following preliminary examination for the economics Ph.D. at the University of Chicago comes from Milton Friedman’s papers at the Hoover Institution Archives. Friedman’s own answers for the 20 true-false questions as well as equations for one question and diagrams for another are included below, following the exam.

______________________

Previous posts with University of Chicago preliminary examinations for Ph.D. and A.M. degrees:

Preliminary Exam (Economic Theory I) 1955

Preliminary Exam (Economic Theory) 1957

Preliminary Exam (Economic Theory, Old Rules) 1960

Preliminary Exam (History of Economic Thought) 1989

______________________

[Handwritten note on top of first page: “Mr. Friedman (grade sheet attached)”]

CORE EXAMINATION
Theory of Income, Employment and Price Level
Summer, 1967

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.

Part I. Indicate whether each of the following statements is True (T) or False (F) and state briefly your reason. (One hour). [2 points each]

____ Free reserves are the difference between total reserves and required reserves.
____ Member banks may count both currency in vault and deposits at their Federal Reserve Bank as satisfying reserve requirements.
____ All banks in the U.S. that are members of the Federal Reserve System are required to be members of the Federal Deposit Insurance Corporations, but the reverse is not true.
____ The Federal Funds rate is the rate at which member banks may borrow from the Federal Reserve System.

5-8: A depositor in a commercial bank transfers funds from a demand deposit to a time deposit at that bank.

____ The bank’s total reserves are thereby increased.
____ The bank’s excess reserves are thereby increased.
____ The amount of currency plus demand deposits that can be outstanding in the System is increased.
____ The amount of currency plus demand deposits plus commercial bank time deposits that can be outstanding in the System is increased.

____If income velocity of circulation of money is not affected by an increase in real income per capita, then the income elasticity of demand for real balances is zero.
____ A rise in interest rates can be expected to raise the income velocity of circulation of money.
____ The real balance effect is absent if all money is “inside” money.
____ In order for a real balance effect to exist, wealth must be one of the variables entering the consumption function.
____ The real interest rate can be obtained from the nominal interest rate by dividing by a price index.
____ The more rapidly the quantity of money grows, the lower will be the quantity of real money balances.
____ The higher the rate of interest, the lower will be the Keynesian multiplier.
____ A tariff reduction involves a shift in the IS (or EE) curve associating a lower real income with each interest rate.
____ A substitution of taxes on property for taxes on earnings (to yield the same revenue at the same national income) will tend to lower national income.

18-20: In the simple income-expenditure model with rigid prices:

____ A constant positive rate of growth of the quantity of money implies a constant interest rate.
____ A constant rate of government deficit spending with a fixed stock of money implies a constant interest rate.
____ A rising stock of capital is inconsistent with a constant interest rate.

Part II: Each of the following statements is true. Prove it. (1/2 hour).

The slope of the LM (or LL) curve is flatter, the more elastic the demand for money with respect to the interest rate and the less elastic with respect to income.
Monetary velocity can be expected to be uncorrelated with the level of prices but to be sensitive to the rate of change of prices.
Treasury policy of substituting long term obligations for short-term obligations in the federal debt outstanding will produce deflationary pressure on the economy if and only if the expectations hypothesis about the term structure of interest rates is false or incomplete.
For a given quantity of money, an increase in the government deficit will produce inflationary pressure on the economy, if and only if the elasticity of demand for real money balances with respect to the rate of interest is less than zero.
The usual balanced budget multiplier is unity if and only if liquidity preference is either absolute or depends on income excluding government expenditures.

Part III. Consider the following two proposed fiscal policies: (1/2 hour).

(a) Balance continuously the high-employment budget.
(b) Keep tax rates constant.

In considering (a), assume that it can be followed (i.e., that it is possible with at most a brief lag to change taxes in response to changes in government expenditures so that, at high employment, the proceeds of all taxes would equal the amount of expenditure at that level of employment.) Assume also all other conditions, including monetary policy, the same for (a) and (b).

Aside from the effect on the average level of income, which policy do you believe would produce greater stability of income? Justify your answer as rigorously as you can.

Part IV. Analyze the likely short and long run effects on interest rates, prices, employment and income velocity of an increase in the rate of monetary expansion from, say, a non-inflationary full employment rate to a higher rate. (1/2 hour).

Part V. In a closed economy the central bank can determine the nominal quantity of money, while the public determines its real value, whereas in an open economy the nominal quantity of money is determined by the balance of payments.
Discuss the validity of this statement under alternative assumptions of fixed and flexible exchange rates. (1/2 hour).

* * * * * * * * * * * * * *

Milton Friedman’s answers and notes

False. = Excess Reserves, Free Reserves = Excess Reserves less Borrowing.
True.
True.
False.
False.
True.
False.
True.
False. Not zero, unity.
True.
True.
True.
False.
True.
True.
True.
Uncertain. Lower W/Y therefore raises savings[?]. [ six words illegible]
False.
True.
False.

Part II.

$\begin{array}{l}{{M}^{D}}=f\left( i,y \right)\\{{M}^{S}}=h\left( i \right)\\f\left( i,y \right)=h\left( i \right)\\\frac{dy}{di}=\frac{-\frac{\partial f}{\partial i}+\frac{\partial h}{\partial i}}{\frac{\partial f}{\partial y}}\end{array}$

Part V.

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

Image Source: Element from Social Science Research Building. University of Chicago Photographic Archive, apf2-07449r, Special Collections Research Center, University of Chicago Library.

Tags Friedman

Chicago Exam Questions

Chicago. Economic Theory Prelim Exam, Friedman (chair), 1955

Post author By Irwin Collier
Post date 2020-06-25

The examination committee for the Economic Theory prelim given in the summer of 1955 consisted of Milton Friedman (chair), W. Allen Wallis, and D.G. Johnson. Besides the questions, we have some of the answers that are transcribed from Milton Friedman’s handwritten notes from his copy of the examination questions.

Previous posts with University of Chicago preliminary examinations for Ph.D. and A.M. degrees:

Preliminary Exam (Economic Theory, Old Rules) 1960

Preliminary Exam (History of Economic Thought) 1989

________________________

ECONOMIC THEORY I
Preliminary Examination for the Ph.D. and A.M. Degrees
Summer Quarter 1955

WRITE YOUR NUMBER AND NOT YOUR NAME ON YOUR EXAMINATION PAPER.

Answer all questions. Time: four hours.

(30 points) Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Give a brief explanation of your answer.
1. ____ If the income elasticity of demand for a product is greater than unity, the relative price of that product will rise as real per capita incomes increase, i.e., will rise relative to products with income elasticity less than unity.
2. ____ When a firm is producing in a region of rising marginal cost, that firm is in equilibrium because average costs are increasing also.
3. ____ The market price of steel and iron scrap fluctuates more than the price of finished steel primarily because the scrap market is competitive while the finished steel market is in the hands of monopolists.
4. ____If automobile firms overproduce and competition forces down the price of new cars, this harms a car owner who has purchased his car on credit since his mortgaged car has suffered a decline in price.
5. ____ It is frequently stated that the more disagreeable or dirty a job is the more it will be necessary to pay workers, but this is contradicted by the fact that college professors earn more than foundry workers.
6. ____ Lowering the support price of wheat in the United States at present would aggravate rather than relieve the problem of surpluses, since farmers would simply produce proportionately more in order to maintain their incomes.
7. ____ An increase in demand for a commodity increases its price, but an increase in price reduces demand. Increases in demand tend, therefore, to be self-compensating.
8. ____ Increasing the minimum wage rate to one dollar per hour will have little or no effect outside the South, since most workers now being paid less than one dollar per hour are in the South.
9. ____ In the absence of factors making for an increase in demand, and other things being equal, a new method will be introduced sooner in a competitive than in a monopolized industry.
10. ____ Without collective bargaining, the workers’ market disadvantage would enable the owners of other productive agencies to appropriate income that would otherwise go to labor.
11. With collective bargaining, workers in general can appropriate income from the owners of other agents.
12. ____ In equilibrium, it is enough to know the marginal factor cost of any one factor and its marginal physical product to know the marginal cost of the product, even though the product is produced by many factors.
13. ____ The demand for a product at the market price is inelastic. It follows that the product must be produced under conditions of net internal diseconomies.
14. ____ Under competition, the marginal efficiency of capital is equal to the marginal physical product of a particular kind of capital good times the price of the product.
15. ____ To assert that the rate at which a consumer is willing to substitute x for y decreases as the quantity of x increases along an indifference curve is equivalent to saying that the indifference curve is concave toward the origin.
(10 points) “East coast gas wars are forcing big producers to chop prices to retailers. With some Manhattan service stations selling gas as low as 15.8¢ per gallon, Socony Mobil, Esso Standard Oil and others have cut wholesale prices up to ½¢ per gallon in most of the seaboard marketing area from Maine to Washington, D.C., the first price reduction in nearly a year” Time, July 25, 1955.
Explain why this quotation is bad economics.
(10 points) Fair trade is now rapidly disappearing. However, a few firms (Sunbeam, Schaeffer) are actively trying to enforce fair trade pricing.
- (a) Are these firms just misguided or are there circumstances in which fair trade would help them?
- (b) If fair trade were generally observed, what would be the effect on return on capital and entrepreneurial effort engaged in retailing?
(15 points) A recent court decree requires a company (The United Shoe Machinery Co.) which heretofore has only leased its machines, for which there are at present no competitors, to offer them for sale at prices which will make it neither more nor less advantageous to buy than to rent the machines. How can such prices be determined, and by what criteria can it be determined whether a given price meets the requirement?
(15 points) Discuss the role of “Euler’s theorem” in distribution theory, and give your own position on the issues.
(20 points)
1. Define (a) perfect competition, (b) oligopoly, (c) monopoly, (d) monopolistic competition, (e) cartel, (f) monopsony.
2. State the conditions of maximum return for the individual firm in a form in which they are applicable to all the preceding market conditions. Indicate the special form which these take for each of the preceding market conditions.
3. Define “length of run” and state is effect on these conditions.

* * * * * * * * * * * * * *

Milton Friedman’s Handwritten Notes for Examination

(30 points)
1. Uncertain. Depends on conditions of supply
2. False. (blank)
3. False. Primarily because supply is more inelastic
4. True. Applies equally to all car owners, whether mortgaged or not
5. Uncertain. Must allow for extra costs of becoming college professor
6. Uncertain. Backward (word illegible) supply curve unlikely for crop like wheat with alternative that can be produced instead
7. False. Confusion of shift in demand and movement along demand schedule
8. False. affects complements and substitutes in (letter illegible, possibly “N”)
9. Uncertain. In competitive industry, only necessary that AC of new be less than AC of old which is equal to MC (word illegible) at margin. In monopoly (word illegible) AC of new must be less than MC of old for (3 words illegible).
10. False. Under competition, no market disadvantage. But (word illegible) that (4 words illegible) enable workers to get larger total income.
  With collective bargaining, workers in general can appropriate income from the owners of other agents.
11. Uncertain. Depends on elasticity of demand for labor.
12. True. (blank)
13. True. if net internal economies, monopoly, which wouldn’t operate at inelastic demand]
14. False. (not legible)
15. True

(10 points) (blank)

(10 points)

(a) (comment not legible)
(b) Reduce it

(15 points) (blank)

(15 points)

1) Exhaustion of product problem—lh;
2) Proves too much;
3) Condition of equilibrium not result of lh.
(“lh” = “linear homogeneity”?)

(20 points)
1. Definitions. (6 points)
2. 11 points

2 points for stating the conditions in form applicable to all the market conditions listed in question 1.

1/MR = MPP_a/MFC_a= MPP_b/MFC_b= …. = 1/MC

Special form for conditions for

1. 1. (2 points, perfect competition) MFC_a= p_a, MR = p_x
  2. (1 point, oligopoly) (illegible word) MFC_a= p_a
  3. (1 point, monopoly) MFC_a= p_a
  4. (1 point, monopolistic competition) same as c.
  5. (2 points, cartel) MFC_a= p_a, MR not equal MC
  6. (2 points, monopsony) MR = p_x

1. (Definition) 1 point; (Effect) 2 points: MFC = infinity or zero for some factors

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 76, Folder “76.2 University of Chicago Economic Theory”.

Image Source: Milton Friedman (undated) from University of Chicago Photographic Archive, apf1-06230, Special Collections Research Center, University of Chicago Library.

Tags Friedman, JohnsonDG, Wallis

Chicago Exam Questions

Chicago. Graduate prelim exams in economic theory. Metzler, Friedman and Knight, 1951

Post author By Irwin Collier
Post date 2020-05-11

The previous post provided the names of the examination committee members for the economics preliminary exams for the Ph.D./A.M. by field at the University of Chicago for the summer quarter of 1951. The names of the students registered for the respective examinations were transcribed as well. The economic theory examining committee for that round consisted of Lloyd Metzler (chair), Milton Friedman, and Frank Knight. This post provides a transcription of both economic theory exams along with Friedman’s hand-written answer to Question 5 of Part I.

_____________________

ECONOMIC THEORY
Part I
Summer Quarter, 1951

(Do not write your name on your paper. Use only the number in the top right-hand corner of this examination.)

Ph.D. candidates. Write 3½ hours. Answer all questions.

A.M. candidates. Write 2½ hours on questions #1 and #2 and one other.

Discuss the probable shape of the long-run cost curve for an industry operating under approximately perfect competition. How would it differ in the short run, i.e., in response to an unanticipated shift in the demand-curve for the product, assumed not to be permanent?
Briefly discuss the Ricardian conception of capital, specifically in relation to his theory of wages. Argue the question whether wages are paid out of (pre-existing) capital or out of (current) product.
Can you find any relation between the Böhm-Bawerk production-period theory of interest and the Ricardian theory of capital and profit? What is the crucial assumption about the nature and source of capital which underlies the production-period theory, and is it sound? How does diminishing returns to investment enter into Ricardo’s and Böhm-Bawerk’s theories?
Consider a trade union that is strong enough to prevent nonmembers from working at the trade in question and whose membership, for simplicity, will be supposed unaffected by the level of returns to members within broad limits (e.g., future membership consists of present membership minus members who die plus male children of present members). Analyze what its position would be toward the immigration of unskilled labor if it took account solely of the effect of such immigration on the incomes of its members. What considerations, if any, should lead it to favor more extensive immigration? What considerations, if any, to favor restriction on immigration? Is there a clear balance in favor of the one position or the other?
“The orthodox tools of supply and demand assume that sellers and buyers are free to buy or sell any quantities they wish at the price determined by the market. This assumption cannot validly be made when price controls or rations are imposed by government. It follows that these tools are useless in analyzing the effects of such governmental actions. Economists should free themselves from slavish adherence to outmoded concepts and fashion new tools for the new problems raised by the modern Leviathan.” Discuss.
The following figures represent the prices and quantities of two commodities, A and B, consumed by three individuals having the incomes stated in two different periods of time.

First Period						Second Period
	P_a	Q_a	P_b	Q_b	Income	P_a	Q_a	P_b	Q_b	Income
Arthur	$1	20	$2	10	$40	$2	10	$1	20	$40
John	$2	20	$1	10	$50	$1	10	$2	20	$50
Paul	$2	20	$1	10	$50	$2.50	10	$1.25	20	$50

Assuming that each individual spends his whole income on the two commodities, and assuming also that there is no change in tastes between the two periods, indicate for each individual what the above information reveals as to whether the bundle of goods consumed in Period I represents a lower or a higher level of satisfaction that the bundle consumed in Period II. Explain your conclusions fully. (It is recommended that a diagram be used in answering this question.)

[Answers to Question 5 in pencil: Arthur “Can’t tell”; John “Inconsistent”; Paul: “First period better”]

From sketch in Milton Friedman’s copy of the exam.

ECONOMIC THEORY II
Summer Quarter, 1951

Time: 2½ hours.

(a) Describe and discuss briefly the circumstances that gave rise to the establishment of the Federal Reserve System and the major events (including its actions) in its history.
(b) In light of this survey of the record, comment on the following conclusion of one student: “The Federal Reserve System should be abolished. It served as an engine of inflation in two World Wars and post-war periods, hindered the re-establishment of satisfactory monetary standards throughout the world in the 1920’s, and failed to prevent the Great Depression, if indeed it was not itself largely responsible for the severity of that depression. The United States would have had a happier history if the pre-1913 monetary arrangements had been continued thereafter.”
“From the preceding considerations it would be seen, even if it were not otherwise evident, how great an error it is to imagine that the rate of interest bears any necessary relation to the quantity or value of the money in circulation. An increase in the currency has in itself no effect, and is incapable of having any effect, on the rate of interest.” (J.S. Mill)
“We can sum up the above in the proposition that in any given state of expectation there is in the minds of the public a certain potentiality towards holding cash beyond what is required by the transactions-motive or the precautionary-motive, which will realize itself in actual cash holding in a degree which depends on the terms on which the monetary authority is willing to create cash…Corresponding to the quantity of money created by the monetary authority, there will, therefore be set. par. a determinate rate of interest.” (J. M. Keynes)
“The saving schedule tells us what part of income the community desires to save. The technical conditions…expressed by the marginal-efficiency-of-investment function, determine the marginal efficiency of the amount of investment that the giving up of consumption permits undertaking. (The intersection of the two schedules determines) the equilibrium rate of interest.” (F. Modigliani).
Can you reconcile these opinions concerning the determinants of the interest rate? Explain fully, making and stating any assumption you like as to the conditions of production, the time period under consideration, and the flexibility of prices and costs.
What measures would you advocate—and give your reasons for inclusion and omission—for controlling the inflationary tendency in the U.S. under present conditions?

Source: Hoover Institution Archives. Papers of Milton Friedman, Box 76, Folder “76.2 University of Chicago, ‘Economic Theory’”.

Image Source: Social Science Research Building. University of Chicago Photographic Archive, apf2-07490, Special Collections Research Center, University of Chicago Library.

Tags Friedman, Knight, Metzler

Chicago Economics Programs Economists Fields

Chicago. Schedule of the preliminary economics exams for the Ph.D. and A.M., Summer 1951

Post author By Irwin Collier
Post date 2020-05-06

The following schedule for preliminary examinations in economics at the University of Chicago from the summer quarter of 1951 comes from Milton Friedman’s papers at the Hoover Institution Archives. We see that he was on the two economic theory examination committees along with Lloyd Metzler and Frank Knight. Besides providing the names of the faculty members serving on the nine committees, the schedule also provides the names of the sixty students registered for the examinations during that quarter.

____________________

DEPARTMENT OF ECONOMICS

SCHEDULE FOR PRELIMINARY EXAMINATIONS
FOR THE PH.D. AND FOR THE A.M.

Summer Quarter, 1951

The schedule below shows the examinations requested for the current quarter. Will the chairman of each committee please be responsible for turning in the complete examination at least one week before the date on which it is to be given?

Date	Examination	Committee	Students Registered
Thurs., Aug. 2 8:30 Law Court	Agricultural Economics	D.G. Johnson, chr. C. Hildreth T.W. Schultz	Dunsing, Marilyn (A.M.) Fox, Kirk (Ph.D) Hughes, Rufus (Ph.D.) Taylor, Maurice (Ph.D.)
Tues., July 31 8:30 Law Court	Economic Theory I	L. Metzler, chr. M. Friedman F. Knight	Baskind, Irwin (Ph.D.) in abs. Bassett, Marjorie (Ph.D.-A.M.) Blumberg, Lionel (Ph.D.-A.M.) Chen, Ho-Mei (Ph.D.) Chen, Sze-te (Ph.D.-A.M.) Chien, Chih Chien (Ph.D.) Cleaver, George (Ph.D.) Dunsing, Marilyn (A.M.) Emmer, Robert (Ph.D.) Fox, Kirk (Ph.D.) Frank, Andrew (Ph.D.-A.M.) in abs Gustus, Warren (Ph.D.) Heizer, Raymond (Ph.D.) Herlihy, Murray (Ph.D.) Hoch, Irving (Ph.D.) Hughes, Rufus (Ph.D.) Krawczyk, Richard (Ph.D.-A.M.) in abs Lerner, Eugene (Ph.D.) Liang, Wei K. Liang (Ph.D.) Lininger, Charles (Ph.D.) Lurie, Melvin (Ph.D.) McGuire, Charles (Ph.D.) Malhotra, Man Mohan (Ph.D.) Malone, John (Ph.D.) Mitcham, Clinton (Ph.D.-A.M.) Morrison, George (Ph.D.-A.M.) Sonley, Lorne (Ph.D.) Taylor, Maurice (Ph.D.) Terrell, James (Ph.D.-A.M.) Toscano, Peter (Ph.D.) Traeger, Gordon (Ph.D.-A.M.) Viscasillas, Felipe (Ph.D.) Waldorf, William (Ph.D.) Weir, Thomas (Ph.D.) Weiss, Roger (Ph.D.-A.M.) Zelder, Raymond (Ph.D.)
Tues., Aug. 7 8:30 Law Court	Economic Theory II	L. Metzler, chr. M. Friedman F. Knight	Chen, Ho-Mei (Ph.D.) Herlihy, Murray (Ph.D.) Hoch, Irving (Ph.D.) Toscano, Peter (Ph.D.) Weir, Thomas (Ph.D.)
Thurs., Aug. 9 8:30 Law Court	Government Finance	P. Thomson, chr. J. Marschak D.G. Johnson	Frank, Andrew (Ph.D.-A.M.) in abs Haskell, Max (Ph.D.) in abs Henry, Edward L. (Ph.D.) Horwitz, Bertrand (Ph.D.-A.M.) Lininger, Charles (Ph.D.) Selden, Richard (Ph.D.)
Thurs., Aug. 9 8:30 Law Court	Industrial Relations	F. Harbison, chr. E. Hamilton H.G. Lewis	Barghout, Saad (Ph.D.) Bechtolt, Richard (Ph.D.) Hoch, Irving (Ph.D.) Liang, Wei K. (Ph.D.) Mullady, Philomena (Ph.D.) Ness, David (Ph.D.)
Thurs., Aug. 2 8:30 Law Court	International Economics	L. Metzler, chr. B. Hoselitz A. Rees	Alberts, William (Ph.D.) Anderson, Edwin (Ph.D.) in abs Chen, Sze-te (Ph.D.-A.M.) Chien, Chih Chien (Ph.D.) Cleaver, George (Ph.D.) Frank, Andrew (Ph.D.-A.M.) Glick, Milton (Ph.D.-A.M.) Gustus, Warren (Ph.D.) Lukomski, Jesse (Ph.D.-A.M.) Mitcham, Clinton (Ph.D.-A.M.) Morey, Donald J. (Ph.D.-A.M.)
Tues., Aug. 7 8:30 Law Court	Money, Banking, and Monetary Policy	L. Mints, chr. E. Hamilton J. Marschak	Alberts, William (Ph.D.) Bauer, Milton (Ph.D.) Blumberg, Lionel (Ph.D.-A.M.) Chen, Sze-te (Ph.D.-A.M.) Chien, Chih Chien (Ph.D.) Cleaver, George (Ph.D.) Conomikes, George (Ph.D.-A.M.) Davis, George (Ph.D.) in abs Emmer, Robert (Ph.D.) Heizer, Raymond (Ph.D.) Horwitz, Bertrand (Ph.D.-A.M.) Hughes, Rufus (Ph.D.) Krawczyk, Richard (Ph.D.-A.M.) in abs Lerner, Eugene (Ph.D.) Liang, Wei K. (Ph.D.) Lukomski, Jesse (Ph.D.-A.M.) Meckling, William (Ph.D.) Mitcham, Clinton (Ph.D.-A.M.) Morey, Donald (Ph.D.-A.M.) Ogawa, George (Ph.D.) Smulekoff, Suzanne (Ph.D.-A.M.) Sonley, Lorne (Ph.D.) Taylor, Maurice (Ph.D.) Terrell, James (Ph.D.-A.M.) Traeger, Gordon (Ph.D.-A.M.) Zelder, Raymond (Ph.D.) Zingarelli, Carla (Ph.D.-A.M.) Rayack, Elton (Ph.D.) in abs
Thurs., Aug. 2 8:30 Law Court	Statistics	T. Koopmans, chr. C. Hildreth H.G. Lewis	Cagan, Phillip (Ph.D.) Hogan, Lloyd (Ph.D.) Katzman, Irwin (Ph.D.) Malhotra, Man Hohan (Ph.D.) Waldorf, William (Ph.D.)
Thurs., Aug. 2 8:30 Law Court	Economic History	E. Hamilton	Mullady, Philomena (Ph.D.) Toscano, Peter (Ph.D.)

Source: Hoover Institution Archives. Papers of Milton Friedman. Box 76, Folder “University of Chicago ‘Economic Theory’”.

Tags Cagan, Friedman, Hamilton, Harbison, Hildreth, Hoselitz, JohnsonDG, Knight, Koopmans, LewisG, Marschak, Metzler, Mints, Rees, Schultz, ThomsonP

Chicago Exam Questions

Chicago. Economic Theory Prelim Exam, Winter Quarter 1957

Post author By Irwin Collier
Post date 2020-04-14

With this post the stock of old Chicago preliminary examinations for the M.A. and Ph.D. in economics transcribed for Economics in the Rear-view Mirror has grown by one to make it an even dozen.

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Previously posted prelim examinations at the University of Chicago:

Prelim Theory 1960.

Preliminary Exam (History of Economic Thought) 1989

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ECONOMIC THEORY I
Preliminary Examination for the Ph.D. and A.M. Degrees
Winter Quarter 1957

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 after results on all preliminary examinations have been received.

Answer all questions: Time: Four hours.

Do section I of the examination on this paper and turn it in to the proctor with the rest of your examination. You are to do sections II-VII separately.

Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Explain briefly the basis for your answer.
1. _____. If the market elasticity of demand for peaches is -2, a peach producer whose output accounts for 1/20^thof the total supply of peaches will be faced by a demand function of elasticity -40.
2. _____. If a constant amount of carpenters’ services is required per unit of housing constructed, and the elasticity of demand for housing is -1, the elasticity of demand for carpenters’ services used in housing must be less (in absolute value) than unity.
3. _____. If the production possibilities for wire can be represented by a Cobb-Douglas production function, and the wire industry is competitive, a rise of 10 per cent in the wages of wire-workers will lead to a reduction of 10 per cent in their employment.
4. _____. The elasticity of demand for a group of commodities with respect to the average price of the group can never be larger in absolute value than the largest of the individual price elasticities of the commodities which comprise the group.
5. _____. If total consumer expenditures are the same before and after a tax, then an excise tax on a consumer good of elastic demand will lead to an increase in consumer spending on other consumer goods, while an excise tax on a consumer good of inelastic demand will lead to a decline in consumer spending on other consumer goods.
6. _____. A tax of 10 per cent per year on the rental value (actual or imputed) of all land will in the long run lead to a lowering of the marginal productivity of labor in agriculture.
7. _____. A technological advance opening up widespread possibilities for new investment in the electronics industry at very high rates of return will tend to lower the real value of the existing stock of residential housing in the United States.
8. _____. A supply curve passing through the origin has an elasticity equal to unity.
9. _____. Given certainty, no firm would hold inventories.
10. _____. A negatively sloping supply curve of labor implies a positively sloping demand curve for leisure.
11. _____. It is impossible to derive a supply function for a monopolist.
12. _____. A legally enforced minimum wage for a particular occupation may increase employment in that occupation.
13. _____. Wage rates rise while interest rates remain the same. It follows that the ratio of capital to labor will increase.
14. _____. Engel’s laws are due to Friedrich Engels.
“It is too obvious for argument that a single employee bargaining with a great corporation, or even with a moderately small employer, is under a disadvantage, except perhaps in time of serious labor shortage”. (Arthur Larsen, A Republican Looks at his Party, p. 125)
Analyze, being sure in the process to discuss the concepts of “bargaining disadvantage” and “labor shortage”.
Derive a demand function for a factor of production. What does it depend on? What things are held constant in the derivation?
a) What was Malthus’ theory of population? In answering, distinguish explicitly between the two variants of his theory, according to the character of the restraints on population.
b) Tell how equilibrium is established under each variant.
c) What effect did the theory have on economic theory?
In the analysis of supply, an important role is played by a fourfold classification of economies or diseconomies of production: internal and external, each of these cross-classified as pecuniary and technical.
1. What does each of the four concepts mean and what role does it play in the analysis of supply?
2. For each of the four concepts, what would be its counterpart in the analysis of demand? If you can, illustrate by example each type of economy, each type of diseconomy.
3. Why is so much more importance attached to these concepts in the analysis of supply than in the analysis of demand?
“The interest rate measures the rate of time-preference. Therefore, in a community, the members of which are as anxious to provide for the future as for the present, the rate of interest will be zero. But the rate of interest also equals the marginal productivity of capital. It follows that in such a community the marginal productivity will be zero”.
Discuss the validity of this argument.
The U.S. government currently guarantees a large fraction of mortgages on newly-constructed houses through the Federal Housing Administration and the Veteran’s Administration. The government guarantee naturally makes these more attractive than non-guaranteed mortgages and so leads to their being available at a lower rate of interest. Recently there has been a decline in residential building. Representatives of the industry have suggested that one means of stimulating building would be to extend the government guarantee to mortgages on existing houses. They claim that the higher cost of mortgages on such houses inhibits their sale and thus prevents individuals currently owning houses from coming into the market for new houses.
Analyze the effect that the enactment of this proposal would have on the rate of construction of residential housing. Do not discuss the desirability as a matter of public policy of either the existing guarantees or the proposed extension.

Source: Hoover Institution Archives. Milton Friedman Papers, Box 76, Folder 2 “University of Chicago ‘Economic Theory’”.

Image Source: Social Science Research Building. University of Chicago Photographic Archive, apf2-07466, Special Collections Research Center, University of Chicago Library.

Tags Friedman

Courses Minnesota

Minnesota. Proposal for Seminar on Business Cycles. Friedman, 1945-46

Post author By Irwin Collier
Post date 2020-03-01

The format of the following seminar proposal matches exactly the template also used for the National Income and Product Accounting course taught by Milton Friedman at the University of Minnesota, 1946. The folder the proposal is found in was incorrectly labelled “University of Chicago. Seminar on Business Cycles” in Milton Friedman’s papers at the Hoover Institution Archives. I still need to check whether this seminar was approved and actually taught.

One can hear in this proposal the rumblings of the future debate to be initiated by Tjalling Koopmans in his 1947 paper, “Measurement without Theory” One can speculate where Friedman stood with respect to the opposite extremes in empirical business cycle research at this time.

Also of interest is his paragraph on the importance of lags in the implementation of stabilisation policy.

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Description of Proposed Course: “Seminar on Business Cycles”

Purpose: To supplement the existing one-quarter course in business cycles, thereby enabling graduate students to get a fuller training in current work on cyclical fluctuations.
Content: The course would deal primarily with empirical work on cyclical fluctuations and with proposals for the control of cycles. A cursory acquaintance with the leading theories of cyclical fluctuations would be assumed. Analysis of the bearing of empirical findings on the validity of the various theories, and consideration of the theoretical assumptions implicit in proposed measures for mitigating cyclical fluctuations would provide an opportunity for more intensive discussion of the various theories. The following three paragraphs indicate in somewhat more detail the range of topics to be covered:
1. Description of cyclical fluctuations

The students would study actual time series covering a variety of economic activities; they would attempt to isolate and to date cyclical fluctuations in these series. The aim would be to give a realistic picture of the temporal behavior of economic activity; to bring home the diversity of movement; to exorcise the naïve notion that cyclical movements consist of clearly delineated synchronous, and uninterrupted upward and downward movements in practically all sectors of economic activity; and to leave with the student a knowledge of the character and timing of the business cycles in this country during the past few decades.

1. Empirical studies of cyclical fluctuations

The emphasis under this topic would be on both techniques of studying cyclical fluctuations and the substantive findings of various investigators. At least two techniques would be considered: (1) the National Bureau technique; (2) the technique of constructing a system of simultaneous difference equations from statistical data (e.g. Tinbergen’s work). The reason for choosing these is that they represent techniques at opposite extremes; the guiding principle of the Bureau technique is to describe the facts compactly and exactly without departing from them, at least in the initial stages of the work; the guiding principle of the simultaneous equations technique is to replace the facts by a mathematical model as early in the analysis as possible.

Measures for controlling cyclical fluctuations

A variety of proposals would be considered. The discussion of each would include analysis of the theoretical assumptions underlying it, the practical problems involved, and the empirical evidence, if any, on its possible success. The success of most of the measures depends critically on (1) the lag between the need for action and the recognition of the need (2) the lag between the action and its results. Some attention will therefore be given to the possibility of forecasting and to possible lags between action and effect.

Title: “Seminar on Business Cycles”
Prerequisites: B.A. 112, Econ. 149, B.A. 101-102.
Duration: Two quarters

Source: Hoover Institution Archives. Milton Friedman Papers. Box 76, Folder 3 “University of Chicago [sic]. ‘Seminar on Business Cycles’”.

Image Source: Milton Friedman in 1947 at the founding meeting of the Mt. Pelerin Society. Collected Works of Milton Friedman website at the Hoover Institution Library & Archives.

Tags Friedman

Chicago Exam Questions

Chicago. Economic Theory Prelim Exam for PhD and AM, 1960

Post author By Irwin Collier
Post date 2020-02-28

The economic theory preliminary examination committee for the summer quarter of 1960 at the University of Chicago consisted of Milton Friedman (chairman), Martin J. Bailey and Lawrence Fisher.

Previous posts with University of Chicago preliminary examinations for Ph.D. and A.M. degrees: