While material for the Harvard economics department has and will dominate the flow of content at Economics in the Rear-view Mirror, I will try to post items from other colleges and economics, if for no other reason than to get a change of scenery. So in this post we head out to UCLA to see what Ph.D. candidates who selected Money as a subject for a comprehensive examination were asked. The exam is transcribed from a personal copy of Robert Clower found in this papers. So from UCLA to Duke to you via Berlin.
Note the examination committee for May 1973 has been identified, one might presume that most if not all members also were involved in the October 1973 examination transcribed below.
Previously posted:
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Meet the members of the Ph.D. Comprehensive Field Exam for Money
(UCLA, Spring, 1973)
Chairman, Benjamin Klein (b. 1943. Ph.D. University of Chicago)
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- Emeritus Professor webpage. [Jan 22, 2012]
Earl Thompson (b. 1938; d. 2010. Ph.D. Harvard University, 1961)
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- UCLA memorial page.
- Obituary by David K. Levine
Michael Darby (b. 1945. Ph.D. University of Chicago, 1970)
Robert W. Clower (b. 1926; d. 2011. D.Litt. Oxford University 1978)
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- Papers of Robert Clower at Duke.
- An interview with Clower: Brian Snowdon and Howard R. Vane. Conversations with Leading Economists, Interpreting Modern Macroeconomics. Edward Elgar, 1999. Pp. 177-192.
For much, much more: The Essential UCLA School of Economics by David R. Henderson and Steven Globerman.
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Memo on Comprehensive Field Exams
in the UCLA Economics Department
April 5, 1973
TO: Economics Department Faculty
FROM: The Graduate Committee and the Acting Chairman
SUBJECT: Comprehensive Field Examinations
Some faculty members have indicated to members of the Graduate Committee uncertainty about their roles and responsibilities in the examination process. The following notes may serve to lessen those uncertainties.
Each of the eleven areas designated as “fields” by the Department has a committee charged with the responsibility for composing the examination and measuring the accomplishments of our students. While the duties involved with conducting these examinations are onerous, the exams have played a central part in the graduate curriculum and are, therefore, worthy of considerable effort.
Typically, the person named chairman of the field solicits questions for the examination from all the other members of the committee. In some cases, his solicitation may go beyond the committee to other department members as well. Usually, he then composes the examination and, before submitting it to the graduate secretary to be typed, circulates a draft copy among the committee members to seek their consensus about balance and format. In particular, it is not intended that the chairman have unilateral authority with respect to the exam’s content.
After the examination has been administered to the students, the results are evaluated. All committees, to our knowledge, have at least two members read every answer. In fields in which the number of students is small, all members read all the answers.
Finally, in order to grade the examination, most committees schedule a meeting at which some consensus about grades is forged. At such meetings, a member who has strong feelings about the qualities (or lack thereof) of any given question or examination may convince the other members. For most committees this procedure has proven more useful than that of simply handing the chairman a score sheet before any dialogue about the results has occurred.
Clearly, modes of behavior with respect to the conduct of the examinations will vary among the field committees. However, to the extent that committees can standardize their actions along the lines indicated above, student and faculty uncertainty about the examinations will diminish, with an accordingly greater emphasis on more substantive matters.
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Comprehensive Field Examinations for the M.A. and Ph.D. degrees — May 1973
Field Committees:
Economic Theory. Hirshleifer (chairman), Thompson, Clower, Demetz, Leijonhufvud
Urban and Regional Economics. Hirsch (chairman), Ellickson, Chen
Public Finance. Somers (chairman), Chen, Lindsay, Vandermeulen
Government and Industry (industrial organization). Demetz (chairman), Peltzman, Hilton, Klein
Mathematical Economics. Thompson (chairman), Britto, Clower
Econometrics. Dhrymes (chairman), Ellickson, McCall
Money. Klein (chairman), Thompson, Clower, Darby
International Economics. Baird (chairman), Chu, Rugg
Economic Development. Herrick (chairman), Britto, Wolf
Labor Economics. Herrick (chairman), Lindsay, Hilton
Economic Institutions (economic history). Murphy (chairman), Shetler, Leijonhufvud
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Ph.D. Money Qualifying Examination
October 15, 1973
Four Hours
Answer six of the following seven questions. Be as specific and rigorous as possible.
There is plenty of writing time to answer all of the questions satisfactorily so try to spend a sufficient amount of time thinking before beginning to write. Irrelevant material presented, however correct, will be penalized.
1. In his 1942 article on “Say’s Law: A Restatement and Criticism,” O. Lange defines “Walras’ Law” by the identity
\sum_{i=1}^{i=N} p_{i}X_{i}\equiv 0,
where Xi denotes the sum of all individual excess demands for the ith conmodity (“collective excess demand”), and Pi denotes the price (expressed in units of the Nth commodity) of the ith commodity. In the same article, Lange defines “Say’s Law” by the identity
\sum_{i=1}^{i=N-1} p_{i}X_{i}\equiv 0,
where pi and Xi are defined precisely as before. Calling the Nth commodity “money,” Lange then asserts that if collective excess demands in an economic system A simultaneously satisfy both Walras’ Law and Say’s Law, then:
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- Money prices are indeterminate;
- Individuals will never desire to change their money balances;
- Money is merely a worthless medium of exchange and standard of value in economy A.
- The economic system A is “equivalent to a barter economy.”
Critically evaluate each of the assertions a) through d).
2. a) The rapid rise in short-term interest rates during the first half of 1973 produced what is commonly called commercial bank “disintermediation” and thereby differential movements in the rates of growth of M1 compared to M2.
Clearly describe this process and how it affects the two definitions
of the money supply. In such circumstances, is the rate of growth of M1 or of M2 a better indicator of monetary policy? Can you suggest a superior monetary aggregate to use as an indicator?
b) During the past year the rate of growth of money has deviated at times substantially from the rate of growth of the base or high-powered money (i.e., there has been a change in the money multiplier) due to large changes by the Treasury in the amount of demand deposits they hold at commercial banks. This led one observer to ask whether it was the Treasury or the Federal Reserve who was making monetary policy.
Clearly describe how changes in government demand deposits affect the money supply. How can the Federal Reserve offset such changes? If the Treasury decided to become a “monetary authority” and tried to control the money supply in this way, how would they fare in competition with the Fed if the two authorities adopted different money supply goals?
3. An Englishman holidaying on a small Mediterranean island paid all his expenses with checks on his English bank. The inhabitants were so impressed by his gentlemanly bearing that instead of cashing his checks, they used them thereafter as money. Who paid for the Englishman’s holiday?
Answer this question in terms of (a) fixed exchange rates and (b) floating exchange rates. Explain how different macroeconomic views of the world affect the answers.
4. There has been much discussion about the exogeneity or endogeneity of the money supply. Explain the different meanings of these terms for policy analysis and for statistical estimation and how these differences have been a source of confusion.
5. Discuss the following proposition: The rate of unemployment is affected primarily by deviations of the actual rate of change of money or government spending from their expected rates of change, and not by the rate of change or level of money or government spending.
Does this proposition have any implications about the relative and absolute possibilities of the persistent use of fiscal or monetary policy to achieve a low rate of unemployment?
Cite any empirical evidence with which you are familiar for or against the proposition (e.g., consider the Andersen & Jordan weights on the effects of changes in government spending on changes in nominal income).
6. The Federal Reserve recently adopted a rule change where required reserves instead of being calculated on the basis of current deposits is now based on commercial bank deposits two weeks earlier (which are obviously given at the time of the calculation).
This rule change has produced a situation where the Fed can no longer affect, in any given week, the total reserves of the banking system and where the major short-run effective policy tool of the Fed is how much it “forces” commercial banks to borrow from them each week — a very crude instrument by which to control the money supply.
Do you agree or disagree? Explain carefully.
Source: Economists’ Papers Archive, David M. Rubenstein Rare Book & Manuscript Library, Duke University. Robert W. Clower Papers, Box 4, Folder “Monetary Economics, PhD exams, Reading list, exams UCLA 1971-1988”.
Image Sources: Benjamin Klein, Earl Thompson, Robert Clower, Michael Darby.