1. The history of economic thought is a history of the rise and fall of differen
ID: 1126736 • Letter: 1
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1. The history of economic thought is a history of the rise and fall of different paradigms, each of which are associated with specific political implications. For example, the Classicals (Smith, Ricardo, and Marx) used the LTV to describe the ultimate determination of value and price. However, their results showed profit was a residual Ricardo) or derived from exploiting labor (Marx). The Marginal Revolution changed the focus of economics toward a Utility Theory of Value and a rigorous focus on supply and demand to explain market behavior. The Great Depression called into question the efficacy of this Neoclassical Model. A. At the Micro level, Thorstein Veblen rejected the maximizing behavior of households and firms. Compare and contrast the Marshallian view of behavior with Veblen's view (30 points). At the Macro level, the reliance on laissez-faire and belief in the market mechanism led to the Great Depression. Neoclassicals also argued that Say's Law ensures demand equals supply, even if there is a leakage of savings. Compare Keynes' view of macro equilibrium to the Say's Law approach (30 points). B.Explanation / Answer
Marshallian view of behavior
Consumer choices are based on maximization of utility.
Characteristics of Marshallian consumer behaviour
Veblen's view
B. Keynes's view of macro-equilibrium
Say's Law approach
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