Tag: Clower

Having just spent nearly a month travelling along the East Coast of the U.S., it is great to get back to posting new content. On this trip I was able to get in three fine days of work in the Economists’ Papers Archive at Duke. While there I found much useful material for Economics in the Rear-view Mirror in the Robert W. Clower papers. A copy of his UCLA obituary can still be found at the Wayback Machine internet archive.

In 1971 Clower joined the UCLA economics department so it is unclear whether he actually contributed to the Ph.D. preliminary examination in monetary economics transcribed below 

_______________________

Ph.D. Qualifying Examination
Four Hours

May, 1971

Monetary Economics

Answer five of the following seven questions.

1. [On the concept of money]
   1. “Contemporary monetary theory analytically treats money as merely another commodity.” State if (and why) you agree or disagree with this proposition.
   2. Money is sometimes distinguished from commodities by the following assertions. Briefly discuss the meaning of each assertion and whether you agree or disagree with it.
      1. Money has no “intrinsic value”; it cannot be enjoyed directly, but must first be converted into something else.
      2. Money is used but is not used up.
      3. Money buys goods and goods do not buy money.
      4. Money has superior liquidity than other goods.
      5. The value of money is fixed in terms of the unit of account.
      6. Money is traded directly for every commodity and vice versa, while commodities are not traded for one another.
   3. Discuss the limitations placed on research in monetary theory if money is considered merely as a commodity.
2. Many writers have asserted in the press that the recent international currency “crisis” points up the unique role of the dollar in present international monetary arrangements. Discuss the international role of the dollar with reference to each of the following statements taken discussions of the crisis.
   1. Over the past couple of years the U.S. has been exporting an unwanted inflation to the countries of Europe, especially Germany.
   2. The immediate cause of the crisis was the presence of interest rates in the U.S. which were too low relative to those in Europe and therefore initiated massive capital flows from the U.S. to Europe.
   3. The massive accumulation by foreigners of dollars underlined the fact that the dollar has become de facto inconvertible into gold and was now little more than an unbacked IOU.
   4. The U.S. should be unconcerned with its balance of payments deficit. Under present arrangements any adjustments to international disequilibrium must be made by foreigners; and all the options available to foreign surplus countries, assuming moderately rational behavior on their part, should be acceptable to the U.S.
   5. The recent crisis points up the inherent instability of current international monetary arrangements. The increase in foreign short-term claims upon U.S. gold reserves and the revaluation of currencies in terms of the dollar will undermine the employment of the dollar as the banking currency of the world and speed the development of a unified European currency.
   6. The recent crisis has strengthened the world monetary system by bringing closer the day when the dollar-gold fixed exchange rate standard is replaced by a system of floating exchange rates.
3. Discuss the following three propositions. (State whether they are true or false and explain why) .
   1. Legal reserve requirements are unnecessary to place a finite limit on the quantity of commercial bank deposits if the deposits are convertible into the government supplied dominant money.
   2. Elimination of the convertibility requirement would lead to an unlimited expansion of deposits.
   3. There is no limit on the extent to which the government can expand the supply of dominant money.
4. An economist recently wrote a letter to the Wall Street Journal complaining that much discussion of how to control inflation has been based on a neo-quantity theory which emphasizes “the quantity of money” while ignoring “the quality of credit”. The Federal Reserve was established, he noted, to regulate commercial bank assets while current discussion (and policy) concentrates on the liability side of the commercial bank balance sheet and entirely ignores the asset side. He maintained that if, for example, commercial banks were forced to limit their lending activity to short-term, self-liquidating business loans, inflation would quickly be controlled. Evaluate this argument.
5. [Monetary vs. fiscal policy.]
   1. It is sometimes argued that fiscal policy should be used to maintain domestic full employment while monetary policy should be used to maintain balance of payments equilibrium. Present this argument and clearly state the assumptions upon which it is based.
   2. Summarize and evaluate the existing empirical evidence on the effectiveness of monetary versus fiscal policy as a stabilization device
6. [Inflation]
   1. Inflation is often considered to be a tax. In what sense is this correct? What is the magnitude of the tax? Who pays and who collects the tax?
   2. What are the effects of inflation on real resource allocation.
      [In (a) and (b) make sure you distinguish between anticipated and unanticipated inflation.]
7. [The Gibson Paradox]
   1. What is the Gibson Paradox?
   2. Why is it considered to be a paradox?
   3. What theoretical explanations have been advanced to explain the phenomenon?
   4. What is the existing state of the evidence concerning these explanations?

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library, Economists’ Papers Archive. Robert W.Clower Papers, Box 4, Folder: “Monetary Economics PhD exams, Reading List, Exams. UCLA, 1971-1988”.

Image Source: Screen shot from Abba—Money, Money, Money karaoke video.