Chapter 1: What Is Economics?
Students have read that there are different schools of economic
theory upon which modern economists base their ideas. In this
lesson they will learn about some of the economists of the
17th, 18th, 19th, and 20th centuries and the history of economic
schools of thought. They will also learn that economic theory
is a reaction to problems of the times.
Students will use information from the Federal Reserve Bank
of San Francisco's Great Economists Web site to learn about
the different schools of economic theory and the historical
figures in economics. They can browse the site to collect
information from the Ten Great Economists and the Timeline
categories. Students will answer four questions and then use
what they have learned to create posters nominating early
economists for the Nobel Prize.
Content Standards (from the National Council on Economic Education)
Standard 3: Different methods can be used to allocate
goods and services. People, acting individually or collectively
through government, must choose which methods to use to allocate
different kinds of goods and services.
Standard 4: People respond predictably to positive
and negative incentives.
Standard 18: A nation's overall levels of income, employment,
and prices are determined by the interaction of spending and
production decisions made by all households, firms, government
agencies, and others in the economy.
1. Students will learn about historical economists and the
different schools of economic thought.
2. Students will use what they have learned to create posters
nominating early economists for the Nobel Prize.
Web Activity Answers
1. Mercantilism, the economic theory that a nation's wealth
came primarily from the accumulation of gold and silver, inspired
leaders of nations to intervene extensively in the market.
Because nations without gold and silver deposits could only
obtain wealth by selling more goods than they bought from
abroad, rulers restricted import trade and granted subsidies
to improve export prospects.
2. Adam Smith, known as the father of modern economics, viewed
the ideal economy as a self-regulating market system that
automatically meets the economic needs of the people. His
book The Wealth of Nations described the basic principles
of economics for the first time. Competition, he wrote, acts
as an "invisible hand" that guides resources to their most
productive use. Additionally, he believed that individuals
acting in their own best interest, and with a minimum of government
intervention, bring the greatest good for society as a whole.
3. Directly opposite of the Classical view, the Marxist school
believed that capitalism was an evil economic system that
would eventually destroy itself. All production belongs to
labor because workers produce all value within society, Marx
wrote. Marx also believed that competition would create dire
conditions for workers as capitalists tried to cut back on
labor costs. This school advocated a world without private
property as opposed to the Classical view that self-interest
promotes the greatest good for society.
4. The Classical view proposed that during a recession, declining
wages and prices would restore full employment. In contrast,
Keynes contended that falling prices and wages depress people's
incomes and prevent renewed spending. Unlike Classical economists,
Keynes supported direct government intervention to restore
economic balance, and his views profoundly revolutionized
government's role in monitoring the economy. Worldwide economic
depression inspired Keynes' arguments.
5. Students' posters will vary.
Go To Student Web Activity