practice-midterm1-110B (1)

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1 ECN 110B: Global Economic History PRACTICE MID-TERM EXAMINATION I This exam has two sections. It is shorter than the actual mid-term which will have 10-12 multiple choice questions. Section 1 Multiple Choice 1.All of the following except one would be indicative of higher integration a. lower tariffs b. interest rates of a country converge to those of global capital markets. c. lower insurance costs d. a rise in the number of skilled workers e. faster shipping times 2. According to Adam Smith one way greater opportunities for trade promote productivity advance is a. Greater investment in pirating and privateering b. specialization c. by limiting the power of dictators d. lowering income inequality e. because fixed exchange rates are not possible if you want to trade 3. Which of the following was not a crucial factor in explaining the migration patterns of free workers in Europe prior to 1914 a. information and personal connections b. credit constraints c. government restrictions that limited entry to specific nationalities d. population pressures in the sending country e. wages in the receiving and sending countries

2 4. Which of the following did the least to promote immigration into the United States? (a) Falling shipping costs (b) The Chinese Exclusion Act of 1882. (c) Famine and hunger in Europe. (d) Good information on job opportunities in the US from previous migrants (e) An economic boom in the US 5. An indicator that capital markets were internationally integrated between 1850 and 1913 is a. Real interest rates gaps between countries persisted b. Bond yield movements were highly correlated between various country pairs c. Savings equaled investment in most economies d. The marginal product of capital diverged e. Exchange rates were fixed 6. When nations signed a trade treaty with a Most Favored Nation clause: a. They made tariffs for the two countries as high as possible. b. Diplomatic relations increased. c. Immigration between two nations was liberalized. d. Both nations now had to extend their lowest tariff on all goods with their treaty partner. e. Capital flows were liberalized. 7. The principle cause of hyperinflation in places like Germany between the wars is likely to be a. Commodity price shocks b. High growth in GDP per capita and “overheating” of the economy c. Reparations payments and government budget deficits d. Nominal rigidities e. Expectations of lower growth 8. The gold standard in the period between the two world wars was weak when compared to the gold standard prior to World War I because of which of the following a. The loss of British leadership at the international level b. Lack of paper money c. Controls on capital flows d. Immigration e. Nations could not commit to play by the rules of the game and nations could not borrow gold in times of crisis from other countries

3 Section 2 Short Answer Questions Directions to the short answer section. Please give brief answers within the space given to these questions on this exam. Keep your answers concise! 1. If countries faced a trade deficit why did the gold standard “rules of the game” say that such a country had to raise interest rates and lower prices? Was this easy to do or not? What implication does this have for an economy’s choice of exchange rate policy? 2. How do we measure economic integration and globalization in this class? Discuss the changes in the level of globalization over time between 1850 and present. Choose one area of analysis (trade, capital flows or migration) and one of the following 3 periods: 1850-1914, 1920-1938 or 1950-2020. What factors drove the changes in globalization the chosen area and period.

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4 3. This question is about the gold standard and the Great Depression a. What key vulnerabilities existed in the gold exchange standard in the 1920s? (3 sentences max.) b. If nations lack credibility to maintain the gold standard: what do capital markets do to them and what do nations have to do to convince markets they have credibility? Give an example of country that lacked credibility in the 1930s. How did this affect the exchange rate policy of this country in the short and long-run? (4-5sentences max.) c. If nations had cooperated in the 1930s like they had prior to World War I how would this have helped them maintain the gold standard between 1929 and 1933? (4 sentences max.) How would monetary policy coordination have helped limit how deep the Great Depression was? d. At the start of the downturn that became the Great Depression, many nations had fixed exchange rates via the gold standard, free capital flows. What would they have liked to do what with their monetary policy to stabilize output or to keep GDP from going down in say in 1929 and 1930? Would this be possible? What policy change could help escape from the Great Depression in this case. (one paragraph max.) e.Why did the gold standard make countries more prone to banking and financial crises in the early 1930s? What other factors made them vulnerable to banking crises? END OF EXAM

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