Economics Concepts and Theories

The Wealth of Nations (1776) by Adam Smith founded classical economics. Treatise on Money (1930) by Keynes presented his monetary theory before The General Theory. In Defence of Globalization (2004) by Jagdish Bhagwati argued for free trade against critics. Principles of Political Economy and Taxation (1817) by David Ricardo developed theories of comparative advantage, rent, and distribution.

Milton Friedman's restatement of the quantity theory of money focuses on the DEMAND for money as a stable function of permanent income, unlike earlier versions that emphasized money supply or price levels. Friedman argued that people hold money based on their long-term income expectations, wealth, and the relative returns on money vs other assets. This was a key innovation in monetary theory.

At equilibrium income, planned investment equals saving. Since saving is income not spent on consumption, this means the amount society wishes to spend on investment equals the amount of income not spent on consumption. Option A describes full employment (not necessarily equilibrium), Option B is tautological (actual always equals actual in national accounts), and Option C describes zero saving.

Academic discipline names ending in '-ics' (economics, physics, mathematics) take singular verbs when referring to the field of study itself. When referring to plural specific phenomena, they might take plural verbs, but here it's clearly the discipline, so 'is' is correct.

Supply-side economics argues that economic growth can be most effectively generated by lowering barriers to produce goods and services. This means adjusting income tax and capital gains tax rates, and allowing greater flexibility in the production process by reducing government regulation. According to the approach, consumers will then benefit from a greater supply of goods and services which would become available at lower prices.

National income is calculated on the basis of the current price levels.

Free markets are characterized by minimal government intervention and prices determined by supply and demand. However, markets rarely achieve perfect equilibrium - they experience constant fluctuations, shortages, and surpluses as they adjust to changing conditions. The statement that they "always work in equilibrium" is incorrect.

A.W. Phillips formalized the Phillips Curve, which shows an inverse short-run relationship between unemployment and inflation. John Maynard Keynes founded macroeconomics, Paul Samuelson developed neoclassical synthesis, and James Tobin contributed to portfolio theory - but none formalized this specific relationship.

According to Keynesian theory, investment decisions depend on two key factors: the Marginal Efficiency of Capital (MEC) - the expected rate of return on new capital investment, and the prevailing rate of interest. Investors compare MEC with the interest rate - if MEC > interest rate, investment is profitable. Investment occurs when the expected return (MEC) exceeds the cost of borrowing (interest rate). Propensity to consume and income levels affect aggregate demand but don't directly determine the investment decision.

Keynes argued that savings and investment are always equal in an accounting sense (ex-post), but they may not be in equilibrium (ex-ante) at the planned level. This distinction is crucial to his theory. Marshall focused on partial equilibrium, Wicksell on natural rates, and Robertson on forced saving.

Marshall developed the Law of Equi-Marginal Utility as part of his utility theory analysis, which explains how consumers allocate income across goods to maximize satisfaction. This principle states that utility is maximized when the marginal utility per unit of expenditure is equal across all goods purchased. The alternative framing as 'Principle of Income Allocation' emphasizes the budget allocation aspect of consumer choice theory.

(B) Marshall's equation is M = kPy while that of Robertson's is P = M/kT. P in these equation represents price level.

Fetter's theory of industrial location emphasizes the least-cost approach, particularly focusing on transportation costs and market orientation. Unlike Weber's theory which considers multiple factors, Fetter's model specifically addresses how industries locate to minimize total costs, especially delivery costs to markets.

Edmund S. Phelps won the 2006 Nobel Prize in Economics for his analysis of intertemporal tradeoffs in macroeconomic policy. His work examined how economic decisions balance present and future consequences, particularly regarding inflation-unemployment tradeoffs and savings behavior. He was a professor at Columbia University. Note: The option spells it as 'Phleps' which appears to be a typo for Phelps.