Exam, Final Practice Test #1
American Economic History.
Professor Rockoff
The correct answers are at the end of the exam. The course changes from
semester to semester, so some topics covered on this exam will not be
covered on the final this semester, and some of the topics covered on
this semester's final will not be covered on this practice test. The
actual test this semester will be a bit longer than this practice exam.
Instructions. Answer the questions by marking the correct choice on your
scantron. Be sure to write Version A on your scantron. There is one best
answer to each question in the sense of the one that is generally true
in the light of the class discussion. The questions are not intended to
trick you, but to see if you remember the most important ideas.
Name ___________________________________________________
Rutgers ID# _____________________________________________________
1. According to the lecture and the text the federal government's first
foray into land policy, the Land Ordinance of 1785, reflected ___.
a. the liberal philosophy that land should be distributed quickly to
farmers
b. the liberal philosophy that substantial tracts of land should be
reserved for the poor
c. the conservative philoposphy that land should be reserved for native
born farmers
d. the conservative philosophy that the price of a farm should be high,
and land sales a major source of revenue
f. this was from the beginning of the semester -- unfair
2. According to the lecture and the text the most important variable
determining the volume of land sales in the Midwest and the South during
the antebellum period was probably
a. immigration
b. Indian resistance to settlement
c.agricultural prices
d. government road building
3. Consider the following diagram, which shows the supply of, and demand for land in a
western county in the 1850s.
1
The amount of land in the county is DF and the price currently set by the government is BD. If
the price were lowered to zero, what would be the change in government revenues?
a. ABC
b. BCED
c. CEF
d. ACED
e. AFD
4. The "safety valve," when the term is applied to nineteenth century
America, refers to the idea that ___.
a. unemployment was limited because workers could always move to the
frontier
b. farm incomes in the Midwest were relatively high because less
productive farmers were constantly being drawn to the new cities
developing in the Midwest
c. frontier violence was the natural outcome of the isolated lives
lived by the pioneers
d. early steam engines exploded because they did not include an outlet
for steam
2
5. Soil erosion and became a major problem in the South after the Civil
War. In class I attributed this in part to
a. ignorance of progressive farming techniques
b. excessive reliance on cotton due to the rising world demand for cotton
c. excessive reliance on cotton due to debt peonage
d. the boll weevil
6. In class I discussed certain cases during the Civil War in which land
confiscated from Confederates was turned over to former slaves. My
conclusion is that in the long run these experiments worked out ______.
a. badly because Northern carpetbaggers gained control of the land
b. badly because the freedmen were not good farmers
c. badly because the freedmen lacked capital
d. reasonably well
7. The "North thesis," as applied to first half of the nineteenth
century America, refers to the idea that economic development was driven by
a. regional agricultural specialization
b. continuous flow technologies
c. rapid immigration
d. growing financial sophistication in Boston, New York, and Philadelphia
8. One possible advantage of a bimetallic system of coinage stressed in
class was that
a. mild deflation would be more likely
b. England was on the bimetallic system, so the US and British systems
would mesh
c. the US could trade with both silver countries and gold countries
d. gold could be used for large transactions and silver for smaller
transactions
9. According to the class lecture and the text, the inflation of the
1830s ultimately was based on
a. paper money issued by the government
b. gold
c. silver
d. international bills of exchange
10. William Stanley Jevons argued that the first prices to feel the
impact of the California gold rush would be the prices of goods ____.
a. sold in competitive markets
b. sold in monopolistic markets
c. in which labor was a large part of the total cost of production
d. in which labor was a small part of the total cost of production
3
11. As originally set by Alexander Hamilton the bimetallic ratio was
15:1; the silver dollar had 15 times as many units of metal, as did the
gold dollar. But when the world price of silver fell, and the world
market ratio of gold rose to 16:1, the United States experienced
_________ and _________.
a. an outflow of silver, an inflow of gold
b. an inflow of silver, an outflow of gold
c. an outflow of silver, an outflow of gold
d. an inflow of silver, an inflow of gold
12. The "bimetallic ratio" was calculated by dividing the ___.
a. value of silver in a silver dollar by the value of gold in a gold dollar
b. value of a silver dollar by the value of a gold dollar
c. rate of return on a silver dollar by the rate of return on a gold dollar
d. weight of silver in a silver dollar by the weight of gold in a gold
dollar
13. In class I concluded that the experiments with land reform after the
Civil War on the former Jefferson Davis plantation and in the Sea
Islands of Georgia were ____.
a. a failure in both cases
b. a failure in the West (New South), but a success in the East (Old South)
c. a failure in the East (Old South), but a success in the West (New South)
d. a success in both cases
14. Of the following, which did Peter Temin (the modern view) consider
an important cause of the Jacksonian inflation?
a. the over issue of paper money by the state banks
b. the destruction of the Second Bank of the United States
c. the interest rate policy of the Bank of England
d. the growth of Opium addiction in China
f. this is the one thing I will remember from the whole course
15. In class and in the text I concluded that free banking ____.
a. didn't work in practice because banks usually had to bribe state
legislators for their "free" licenses
b. increased the growth rate of the economy, but at the cost of tilting
the distribution of income toward the rich.
c. occasionally produced wildcat banking, but this was not typical
d. always proved a success
16.In class I noted that Sherman's "March to the Sea" was made possible by
a. the belief in the South that trench warfare was not gentlemanly
b. the South's high agricultural productivity
c. the North's ability to construct railroad track at a high rate
d. the North's control of ocean shipping
4
17. According to the Beard-Hacker Thesis economic growth in the North
was _____ after the Civil War than before, because _______.
a. slower, of the damage done to the capital stock during the war
b. slower, of the damage done to the quality of the labor force during
the war.
c. faster, its easier to catch-up to where you were
d. faster, legislation passed during the war created a better framework
for growth
18. According to Alfred Chandler the most important economic development
(among those listed below) leading to the growth of Big Business in the
period 1869-1893 was ________.
a. the rise of continuous flow technologies
b. the passage of tariff laws, bankruptcy laws, and other pro-business
legislation
c. the extension of the railroad network
d. the rise of investment banking
19. According to the Muckraker's view, the Standard Oil Company got
control of independent refiners by ______.
a. offering independent refiners a share of the profits to be made from
monopoly and efficiency
b. selling refinery products at a low price until the independent
refiner was driven into bankruptcy.
c. offering independent refiners freedom from local government regulation
d. using junk bonds to finance leveraged buyouts
20. According to Stephen Magee's view of the Standard Oil Company (which
is opposed to the view of Muckrakers such as Ida Tarbell) John D.
Rockefeller got control of independent refiners by ______.
a. selling refinery products at a low price until the independent was
driven to bankruptcy.
b. offering independent refiners high prices that reflected the profits
to be made from monopoly and efficiency
c. offering independent refiners freedom from local government regulation
d. using junk bonds to finance leveraged buyouts
21. The "Hold the Line Order" in World War II refers to
a. the Presidential order that required the Fed to peg interest rates
b. the Presidential order that required the Office of Price
Administration to deny most price increases and set dollar and cents prices
c. the Presidential order limiting the use of raw materials in
non-essential production
d. a famous stand by Notre Dame against Ohio State on the one yard line
5
22. One problem generated by price controls in World War II was forced
uptrading. In this context what is the best example of forced uptrading?
a. more fat is added to hamburger
b. meateasys emerge
c. low-price-low-quality clothing disappears
d. weekend sales of furniture are discontinued
23. No one has ever produced a machine that can produce a good cigar.
Hence, the ___ of James Buchanan Duke's American Tobacco company to
monopolize the cigar making industry ___ Chandler's explanation of
vertical mergers and the growth of big business.
a. success, contradicts
b. failure, supports
c. success, supports
d. failure, contradicts
e. I also missed this one on the midterm
24. The famous story of QWERTY is used by economic historians to
illustrate the principle of
a. diminishing returns
b. quantity theory of money
c. the-price-specie-flow mechanism
d. path dependence
25. Jeffrey Miron, the leading economic historian of prohibition (the
guy we discussed in class), concluded that alcohol consumption ___.
a. remained virtually unchanged during prohibition
b. initially fell, but then returned quickly to the level it had been at
before prohibition
c. initially fell, but then returned to 60 or 70 percent of what it had
been before prohibition
d. actually rose during prohibition due to the "forbidden fruit" effect.
26. In the early stages of price control in World War II, the government
relied on selective price controls. In class I argued that these failed
because
a. the wrong (unimportant) prices were controlled
b. it became a bureaucratic mess
c. firms whose prices were controlled lobbied Congress for offsetting
tax breaks.
d. prices of uncontrolled products increased rapidly, producing a
misallocation of resources
f. Its time to give this question a rest for a couple of semesters.
27. When World War I began in Europe in the year ____ there was an
incipient banking panic in the United States, which was solved by ____.
6
a. 1914,deposit insurance
b. 1917,deposit insurance
c. 1914,emergency currency
d. 1917, emergency currency
28. A major problem with the "Priorities System" initiated by the War
Industries Board in World War I, that I discussed in class, was ___.
a. political favoritism
b. the overissue of high priorities
c. quality deterioration
d. inadequate penalties for violators
29. The priorities system of World War I was intended to tell ____.
a. manufacturers the order in which they should finish work for which
they had accepted orders
b. manufacturers the crucial standards that any particular weapons
system should meet
c. price controllers which prices to spend the most effort controlling
d. price controllers which commodities should be rationed
30. In a nutshell, the "transfer problem" created by German
Repararations after World War I was how could Germany
a. pay in gold, if she wasn't on the gold standard
b. increase her exports and decrease her imports
c. ship goods to other countries given the destruction of her rail
network and her merchant marine
d. set up productive factories in countries that lacked her highly
educated labor force
31. In World War I price controls on basic foods such as wheat tended to
produce shortages. To solve this problem the authorities relied on.
a. ration tickets
b. price increases
c. draconian penalties for black marketers
d. voluntary campaigns to reduce consumption of food stuffs moat in
demand (victory bread).
32. At the lowest point of the Depression in 1933 unemployment was in
the neighborhood of ____ percent.
a. 10
b. 15
c. 25
d. 40
33. The First Banking Crisis in the 1930's involved mainly
a. rural banks in the U.S.
7
b. large European banks
c. New York banks on Wall Street
d. Banks all over the country; it hit randomly
34. Milton Friedman claimed that the Great Depression began in earnest
with the first failure of a large urban bank to fail during the
Depression, namely the _____.
a. Ohio Life Insurance and Trust Co.
b. Bank of Lower Manhattan
c. Bailey's Bank
d. Bank of United States
e. The Manhattan company
35.The large Austrian bank that failed in 1931, thus exacerbating the
worldwide financial crises was the
a. Deutsche Bank
b. Kreditanstalt
c. Landesbank
d. Bayerische Handelsbank
e. Bodencreditbank
36. In 1931 the closure of almost all the banks in ____ further
undermined confidence in the world financial system.
a. Britain
b. France
c. Germany
d. Spain
e. Norway
37. Britain's departure from the gold standard in 1931 led to a
deterioration in economic conditions in the United States because as a
result ________.
a. reduced world gold supplies
b. world interest rates rose
c. exports of gold from the US increased
d. Canada and other countries within the British empire found it harder
to sell their goods in the U.S. so they traded more with England
38. During (or shortly after) the Bank Holiday ordered by President
Roosevelt in 1933, all of the following actions designed to stabilize
the banking system were introduced except____.
a. the U.S. left the gold standard
b. the banks were inspected
c. deposit insurance was started
d. banks were allowed to branch across state lines
8
39. According to a number of critics of Federal Reserve behavior during
the 1930s (and of the Bank of Japan today), the Fed made a mistake
because it used _____ as an indicator of whether its policies were easy
or hard.
a. market interest rates
b. real interest rates
c. prices
d. real wages
e. market wages
40. When economic historians talk about the Federal Reserve acting as a
lender of last resort? they are talking mainly about having the Federal
Reserve lend money to ____ that are in financial trouble.
a. banks
b. government programs such as unemployment insurance
c. states that are
d. financial markets (such as the stock market)
e. any businesses (although usually a big business such as a railroad)
41. A power struggle is often blamed for the failure of the Federal
Reserve to increase the money supply during the Depression. The ______
would propose increases in the money supply; but these were opposed by
______.
a. Federal Reserve Board, U.S. Treasury
b. Comptroler of the Currency, Federal Reserve Board
c. Federal Reserve Bank of New York, Federal Reserve Board
d. Federal Reserve Board, Federal Reserve Bank of New York
e. U.S. Treasury, Federal Reserve Board
42. According to the explanation for the depression developed by Ben
Bernanke which stresses the role of the banking panics, banks found it
hard to solve the "asymmetric information" problem during the 1930s
because ____.
a. Many borrowers lacked adequate collateral
b. Changing federal bank regulations created uncertainty
c. The fall in the stock of money reduced aggregate demand
d. Interest rates had fallen to "liquidity trap" levels
e. Large government deficits crowded out private spending
43. According to the Keynesian interpretation of the 1930's, the main
reason we still had double-digit unemployment in 1939 was that
a. interest rates were too low
b. federal budget deficits were too small
c. the stock of money was too small
d. investment spending was too high
9
e. prices on the stock exchange were still too low
44. In Milton Friedman's interpretation of the 1930s, the key factor
creating the Great Depression was the fall in ___
a. the stock of money
b. private investment spending
c. government spending
d. asset prices
e. interest rates
45. In class (and in Chapter 23!) I tried to answer the question of
whether the Great Depression could happen again. My answer, like that of
most economic historians, was that the probability of a repeat is
_______ because (among other reasons) _______.
a. substantial, our continued dependence on a highly volatile stock market
b. substantial, of our reliance on a fractional reserve banking system
c. remote, policymakers are unlikely to repeat the mistakes of the 1930s
d. remote, industry now makes up a much larger share of GNP than it did
in the 1930s
46. According to the class lecture the United States sometimes deployed
weapons in World War II that were not adapted to the latest battlefield
experience because ____.
a. the professors who ran American production in WWII would not listen
to the military
b. U.S. manufacturers wanted to build weapons in plants that would be
useful after the War
c. U.S. production administrators were reluctant to halt production to
modify assembly lines
d. U.S. workers lacked the skills needed to manufacture high-tech weapons
47. Which of the following statements best characterizes the course of
munitions production during World War II?
a. Year after year the Germans produced more munitions than the United
States, but not more than the Allies as a whole.
b. The Germans accumulated a large stock of munitions during the late
1930s, but their production lagged behind the U.S. during the war
c. Munitions production in Germany and the United States were
surprisingly close year after year, probably because each country tried
to match the other
d. Year after year the Germans produced more munitions than the Allies,
but the Allies had more men under arms, and this was the deciding factor
48. Strategic bombing, in contrast with tactical bombing, is aimed at
destroying the enemy's ___.
a. industrial capacity
10
b. air defense system
c. ground forces
d. air and sea forces
49. As a result of World War II Germany and Japan hoped to achieve
"autarky," which means _____.
a. control of the military-industrial complex by the government
b. a military oriented economy embracing education, science, the media,
and so on.
c. a planned economy
d. national economic self-sufficiency
50. In 1942, the United States was _____ in annual munitions production.
a. still far behind Germany and Japan
b. still behind Germany but ahead of Japan
c. still behind Japan but ahead of Germany
d. far ahead of Japan and Germany
51. The firebombing of Hamburg was considered a ____ by the Strategic
Bombing Survey because _____.
a. success, German oil supplies were destroyed
b. success, thousands of potential German workers were killed
c. failure, German munitions production in nearby suburbs increased
d. failure, loss of aircraft was high, and the damage caused by the fire
was easily repaired
52. The lesson that Germany and The Soviet Union took from the Spanish
Civil War, according to the class lecture, was that _____.
a. strategic bombing would be effective, but tactical bombing would be,
therefore it was better to concentrate
b. strategic bombing would not be effective, but tactical bombing would be
c. both strategic bombing and tactical bombing would be effective
d. neither strategic bombing nor tactical bombing would be effective,
therefore it was best to concentrate on fighters that could defend
against enemy aircraft
53. One reason, discussed in class, that the United States was able to
increase production of "guns" by 10 fold while reducing "butter" a
relatively small amount was that ___
a. the US could rely on large amounts of imported raw materials and
labor from Mexico and other countries in Latin America
b. the US government set unrealistically high prices for munitions so
the 10 fold increase is more nominal than real
c. the US was able to use off-the-shelf weapons technology from Britain
and France
d. "guns" are inherently easier to produce because less variation is
11
required than with civilian goods
e. the US started the war with a large amount of unemployed and
underemployed resources
54. On the basis of the findings of the Strategic Bombing Survey John
Kenneth Galbraith argued that in World War II strategic bombing was
basically a _____ because bombing _____.
a. failure, the focus on bombing diverted resources from the Navy and
submarine forces, which were more effective means of blockade
b. success, held German and Japanese munitions production approximately
constant at their prewar (1939) level
c. failure, failed to reduce German or Japanese munitions production
until these countries were already defeated on the ground
d. success, diverted the German air force from the eastern front
55. On the basis of the findings of the Strategic Bombing Survey Richard
Overy, the author of How the Allies Won, argued that in World War II
strategic bombing was basically a _____ because bombing _____.
a. failure, the focus on bombing diverted resources from the Navy and
submarine forces, which were more effective means of blockade
b. success, held German and Japanese munitions production approximately
constant at their prewar (1939) level
c. failure, failed to reduce German or Japanese munitions production
until these countries were already defeated on the ground
d. success, diverted the German air force from the eastern front
56. During World War II the British tended to specialize in bombing
_____; while the Americans specialized in bombing _____.
a. oil refineries, ball bearing plants
b. manufacturing facilities, mines and other sources of raw materials
c. bunkers, dams and bridges
d. at night, during the day
e. air fields, naval harbors
57. Transfer payments when the term is used in national income
accounting include
a. government spending on tanks and planes.
b. government spending on national forests and parks.
c. the salaries of senators and federal judges.
d. welfare benefits and Social Security payments.
58. Adolph Wagner wrote that the public sector would continuously and
inevitably expand due to
a. bureaucratic self-interest.
b. the "tyranny of the status quo."
c. the need for governments seeking military strength to placate
12
labor's increasing demand for social justice.
d. the tendency of government to expand during wars and then hold on to
some of its gains during the transition to peace
59. You would expect that in a democracy the rich would be taxed very
heavily and that after tax income would be about equal. Yet large
differences in after-tax incomes persist. Allan Meltzer argues that we
have persistent inequality because ___.
a. the public has been misled about the degree of inequality by
politicians and the media who are bought off by the wealthy
b. people generally believe that fairness requires that people be
allowed to keep most of their income
c. interest groups such as the elderly manipulate the legislature and
frustrate the general will of the people
d. people believe that total output would be lower if taxes on the
wealthy were raised too much
60. Economist Sam Peltzman has argued that the ___ equal the
distribution of income in a country, the larger will be its central
government because ___
a. more, there will be greater emphasis on military defense
b. less, there will be more social welfare programs
c. more, the poor will have the resources to make their demands felt
d. less, there will be so many poor people that they will be able to
overwhelm all political opposition
61. Arthur Schlesinger Sr. and Jr., explain the growth of the federal
government by ______.
a. Himmelfarb's law combined with the checks and balances in the
American political system that tend to delay the inevitable.
b. tax reforms, since the more widely taxes are spread the more
government spends
c. brief periods of liberal reform that set up permanent institutions
d. increases in poverty
62. The "Little New Deal," as the term was used in class and in the
text, refers to ___.
a. Canadian welfare policies adopted in the 1930s
b. a small group of reforms that Roosevelt saw through Congress during
World War II.
c. the social welfare legislation passed during the Kennedy-Johnson
administration
d. the social welfare legislation passed in Wisconsin (the leader of
the progressive states) during the 1920s
63. Milton Friedman argued that government programs are hard to get rid
13
of once they are started because they are protected by an "iron
triangle" of ____.
a. Academics, beneficiaries, the press (newspapers, television, etc).
b. the press, bureaucrats, beneficiaries
c. Labor unions, beneficiaries, supporters
d. Bureaucrats, beneficiaries, congressmen
e. Labor unions, bureaucrats, the press
f. Iron
64. If we measure the size of the federal government by the share of
federal spending in GNP we find _______.
a. the increase between 1800 and 1929 was, surprisingly, about the same
as between 1929 and 1985.
b. that most of the change between 1800 and 1985 had occurred between
1800 and 1929
c. that the ratio was well over 10 percent in the nineteenth century
d. little change between 1810 and This 1929
f. was that handout in class
65. According to Robert Higgs, crises lead to a permanent _____ in
federal spending relative to GNP because, for one thing, _______.
a. rise, crises produce increased levels of industrialization and
urbanization
b. fall, after crises people want a return to "normalcy."
c. fall, debts incurred during crises must be repaid leaving less money
for other purposes
d. rise, people get used to higher taxes during the crisis.
66. Arthur Schlesinger Jr. predicted that the Clinton administration
would favor growth of the Federal government because
a. real income growth had slowed.
b. the time since the last major war has grown longer and longer
c. fighting inflation and preserving the international value of the
dollar, had become major preoccupations of policymakers
d. President Clinton and many of his advisors came of age in the
liberal 1960s
67. The GI Bill could be cited as a successful example of
a. universal health insurance.
b. an unemployment compensation program.
c. an educational voucher program.
d. a job training program.
68. After World War II Economists such as James Tobin and Paul Samuelson
claimed that _________ during World War II provided solid evidence of
the effectiveness of Keynesian policies.
14
a. increases in deficit spending accompanied by extremely low unemployment
b. increases in taxes accompanied by rising federal budget surpluses
c. increases in the money supply accompanied by falling interest rates
d. price controls accompanied by inflation
69. If we examine the distribution of regional real per capita incomes
in the United States over the last 150 years we find the following
pattern: regional incomes were ___ 150 years ago; and ___
a. very diverse, have converged.
b. close together, have diverged
c very diverse, remain very diverse today although the high income
regions and low income regions have changed places
d very diverse, the pattern remains almost the same today.
70. In general, labor in the United States has moved from ______ regions
to ______ regions causing regional per capita incomes in the United
States to _____ in the long run.
a. low-wage, high-wage, converge
b. high-wage, low-wage, diverge
c. low-wage, high-wage, diverge
d. high-wage, low-wage, converge
71. In general, capital in the United States has moved from ______
regions to ______ regions causing regional interest rates in the United
States to _____ in the long run.
a. low-interest-rate, high-interest-rate, converge
b. high-interest-rate, low-interest-rate, diverge
c. low-interest-rate, high-interest-rate, diverge
d. high-interest-rate, low-interest-rate, converge
72. Horace Greeley, a nineteenth century American politician and
newspaper editor, is famous for saying "Go West Young Man, Go West" This
was _____ advice, according to the class lecture, because _____.
a. good, per capita income was lower in the west, and therefore likely
to rise
b. bad, per capita income was higher in the west, and therefore likely
to fall
c. good, per capita income was higher in the west, and likely to stay
that way for a time
d. bad, per capita income was lower in the west, and likely to stay
that way for a time
73. In class I argued that the fact that the United States has been a
free trade area has _____ poor regions in their effort to catch up with
rich regions because poor regions _____.
a. helped, could protect their "infant industries"
15
b. hindered, poor regions ended up selling natural resources and
importing manufactured products
c. helped, could sell their products in rich regions without having to
pay tariffs
d. hindered, poor regions ended up as quasi-colonies of rich regions
74. If we go pack to the 1880s or 1890s, we find that the region of the
United States with the highest per capita income was
a. the far West (California and surrounding states)
b. the old South (Virginia and surrounding states)
c. New England
d. the new South (Louisiana and surrounding states)
75. In general falling transportation costs, according to the class
lecture, tended to ______ convergence of regional per capita incomes in
the United States by ______.
a. encourage, increasing spending on investment
b. discourage, increasing the flow of information among regions
c. encourage, allowing firms in poor regions to sell on the national
market
d. discourage, allowing firms in established regions to maintain their
monopoly position
76. Alexander Gerschenkron is the famous author of _______ in which he
argued that different countries relied on different institutions to
import the technology needed for economic development.
a. The Stages of Economic Growth
b. The Meiji, the Mandarins, and the Monopolists
c. The Past as Prologue
d. Economic Backwardness in Historical Perspective
e. The World Economy: History and Prospect
77. Which of the following statements about the economic growth of the
United States is not true? "Real income per capita in the United States ___"
a. was high by world standards at the beginning of the nineteenth century.
b. has grown more rapidly than in almost all other industrial countries.
c. was high by world standards at the end of the twentieth century.
d. has converged with real per capita income in other industrial
countries over the last century
78. During the second half of the 19th century and first half of the
20th century, per capita incomes on the West Coast of the United States
were ___ than the national average, and per capita incomes in the South
were ___ than the national average.
a. lower; higher
b. higher; lower
16
c. lower; lower
d. higher; higher
79. After the Civil War, per capita income in the South was relatively
low compared with other regions of the United States. Which of the
following statements best describes how long it took the South to
(almost but not quite) catch up with the rest of the country.
a. about one year
b. about five to ten years
c. about 25 years
d. several generations
80. If you based your estimate on how long it took poor regions of the
United States to catch up to the per capita incomes of the rest of the
nation, how long do you believe it would take Eastern Europe to obtain
per capita incomes comparable to those of Western Europe?
a. about one year
b. about five to ten years
c. about 25 years
d. several generations.
81. Three of the following probably were significant causes of the Great
Depression. Which was not a significant cause of the Great Depression?
a. bank failures
b. stock market crash
c. government fiscal and monetary policy
d. large increase in imports that took jobs away from American workers
82. What is the best description of the U.S. economy from 1929-1940?
a. GNP decreased continually during the greatest Depression our nation
has known.
b. The economy suffered a large drop from 1929-1933, but then grew
steadily through WWII.
c. The economy suffered an initial drop, a four-year expansion and then
another drop towards the end of the decade.
d. The unemployment rate increased steadily throughout the period.
83. What best describes the pattern of bank collapses in the United
States during the Depression?
a. The vast majority of banks closed early in the decade and the
closing dropped significantly in the latter half of the decade.
b. Banks collapsed consistently throughout the 1930s.
c. The failure rate was relatively low early in the decade and grew
steadily throughout the period.
d. in fact there were fewer bank failures in the 1930s than in the
1920s and 1950s; the notion that the banking system collapsed is a myth.
17
84. The failure of the Bank of United States in December 1930 probably
intensified the banking panic for each of the following reasons except
that it proved that
a. the Fed might fail to act as a lender of last resort.
b. big banks could fail.
c. New York banks could fail.
d. that Wall Street banks could fail.
85. Between 1929 and 1932, nominal interest rates ___, and real interest
rates ___.
a. rose; rose
b. rose; fell
c. fell; rose
d. fell; fell
86. During the stock market boom of the late 1920s, stock prices rose
a. at about the same rate as dividends.
b. faster than dividends.
c. more slowly than dividends.
d. There is, surprisingly, not enough information to know what happened
to prices relative to dividends.
87. The United States financed WWI primarily by
a. increasing personal income taxes.
b. increasing corporate taxes and luxury taxes.
c. borrowing from the public.
d. printing new money.
88. In class I traced the decision by the United States to go to declare
war in World War I to
a. Britain's decision to use its surface fleet to blockade and starve
Germany
b. Germany's decision to use its submarine fleet to blockade and starve
Britain
c. Wall Street's fear that its holdings of British bonds would become
worthless if Britain lost the war
d. Wall Street's fear that deposits held by American banks in German and
Austrian banks would become worthless if Germany lost the war.
89. Between 1914 and 1920, the U.S. price level
a. fell dramatically.
b. nearly doubled.
c. rose and fell in accordance with intensity of the war.
d. remained relatively stable.
18
90. In class and in the text I traced the hunger experienced in central
Europe during World War I to a shortage of ____
a. farm labor
b. petroleum
c. fertilizer
d. draft animals
91. Persistent U.S. deflation between 1879 and the mid-1890s was
primarily due to the fact that the ___________ was growing faster than
the _________.
a. supply of money; demand for money
b. demand for money; supply of money
c. demand for money; demand for goods
d. demand for goods; supply of money
92. Americans who supported William Jennings Bryan and the Free Silver
movement
a. advocated a reduction in the U.S. money supply.
b. included the U.S. Secretary of the Treasury.
c. wanted to increase the U.S. price level.
d. wanted free railroad transport of silver from western mines to the
east.
93. The years between 1896 and World War I were characterized by
a. rapidly rising prices in the United States.
b. wild fluctuations in international exchange rates.
c. the heyday of the gold standard in the United States and most
industrialized countries: mild inflation and stable prices
d. barriers that prevented the flow of goods and capital across
international borders.
94. The central argument of Keynes's Economic Consequences of the Peace,
according to the class lecture was that _____.
a. ending the gold standard would lead to chronic inflation
b. heavy reparations imposed on Germany would produce bitterness in
Germany
c. ending the gold standard would lead to chronic deflation
d. ending war contracts would lead to mass unemployment
95. Jeffrey Miron, the leading economic historian of prohibition (the
guy whose work we discussed in class) used ______ to estimate the amount
of alcohol consumption during prohibition.
a. per capita consumption in Canada, Britain, and other countries not
subject to prohibition
b. Deaths from Cirrhosis of the liver
c. Legal production plus an estimate of illegal production based on
19
court cases
d. Legal production plus excess production in Canada, Cuba, and other
sources of supply
96. There are various theories about why stock prices crashed when they
did in 1929. The one I mentioned in class as having some support among
economic historians was that
a. the Fed and other central banks were raising their discount rates
b. the Fed had raised margin requirements on stock market loans
c. federal income taxes were raised
d. there were bad earnings reports from a number of firms including RCA
97. Which of the following was not used to subsidize the
transcontinental railroad companies and their building of railroads?
a. loans from the U.S. government
b. reduced corporate income taxes
c. land grants
d. direct payments based on the number of miles of tracks laid
98. In considering the financial history of the transcontinental
railroads, I argued in class and in the text that there was
a. surprisingly little corruption given the corruption in other walks
of life at the time.
b. surprisingly little corruption, mostly involving the buying off of
federal regulators when rate controls became unreasonable.
c. a great deal of corruption, mostly in the form of high fees charged
immigrants for what was really free federal land.
d. a great deal of corruption, mostly because construction companies
were run by insiders.
99. In Munn v. Illinois (1877), the Supreme Court held that
a. state laws limiting prices charged by grain elevators were a
violation of the Fifth Amendment.
b. grain elevator and freight prices could only be regulated by the
federal government.
c. within the state, states have a right to regulate businesses that
are "clothed with a public interest."
d. organizations like the Grangers violated federal conspiracy laws.
100. After computing the social savings from the railroads, Fogel
concluded that
a. the railroads were at all times indispensable to the economic
development of the United States.
b. the railroads were not indispensable in 1850 but by 1890 were
indispensable.
c. the railroads could explain only a small fraction of the growth in
20
real income in the United States.
d. economics is not sufficiently scientific to make a meaningful
calculation of the social savings.
101. Problems for farmers in the second half of the 19th century included
a. falling per capita incomes.
b. reduced domestic agricultural output.
c. rising prices for consumer goods.
d. increased world supply of agricultural products.
102. Farmers who joined the Greenback Party in the late-19th century
felt that
a. the government should make efforts to curb the inflation that the
country was experiencing.
b. farm prices were too high in comparison to the overall price-level
of the economy.
c. the government should own all transportation and communication
facilities.
d. an increase in the money supply would benefit debtors.
103. In response to Southern restrictions on the export of cotton in
1861 and 1862,
a. Britain was forced to give financial aid to the Confederate
government due to its dependence on Southern cotton.
b. Britain provided a naval blockade protecting ships carrying Southern
cotton.
c. the price of Southern cotton soared, allowing Southern planters to
earn substantial profits.
d. Britain relied on alternate sources of supply to meet its cotton
demand.
104. The Confederacy's primary mechanism for generating revenue during
the Civil War was to ____.
a. raise taxes.
b. increase trade and gain more money from exports.
c. borrow more money.
d. print more money.
105. The practice of paying for stock with (say) 50 percent cash and 50
percent in funds borrowed from a broker, that became common in the
1920s, is known as ____.
a. Intermediated borrowing
b. buying on margin
c. fractional reserve buying
d. buying at par
21
106. For the tenant in the postbellum South, the advantage of
sharecropping compared with renting for cash was that
a. the sharecropper's output was less dependent on weather.
b. the sharecropper realized all of the gains from extra effort.
c. sharecropping required more capital than renting.
d. under sharecropping the landlord absorbed part of the risk of a bad
harvest.
107. After the Civil War, the Southern sharecropper was often tied to
the land by an economic system similar to although less onerous than
slavery, and known as
a. debt peonage.
b. the labor redundancy system.
c. immiserizing growth.
d. the Sea Islands system.
108. After the Civil War, many Southern farmers fell into a long-run
spiral of debt caused by
a. the monopoly power of country stores.
b. the monopoly power of railroads.
c. excessive interest rates charged by banks.
d. carpetbaggers.
109. Part of the decrease in real wages in the North during the Civil
War was due to deteriorating productivity because of
a. the inability of firms to replace machinery.
b. the need to use inexperienced workers.
c. the decline in coal production.
d. excessive days lost due to strikes.
110. Under the bimetallic standard of the 19th century,
a. the amount of money in circulation increased.
b. the American dollar served poorly as a unit of account.
c. only one metal tended to circulate as money at any given time.
d. the government earned profits by selling gold.
111. According to Gresham's Law,
a. inflation and unemployment are inversely related.
b. tax rates and tax revenues are inversely related.
c. bad money drives out good money.
d. inflation is inevitable in the long run.
112. In the mid-1830s, the United States entered an inflationary period
that culminated in the depression of 1839-1843. Today economic
historians attribute this economic downturn to
a. the demise of the Second Bank of the United States in 1832.
22
b. over-issuance of gold coins by the U.S. Mint.
c. over-expansion by the manufacturing sector.
d. external forces, including large inflows of specie from Mexico and
Europe.
113. Which was not a result of the California gold rush?
a. A substantial increase in the money supply.
b. A large increase in GNP.
c. A significant decrease in the prices of farm goods.
d. A long economic expansion
114. The First Bank of the United States was the brainchild of
a. Alexander Hamilton
b. Nicholas Biddle
c. John C. Calhoun
d. Christopher Redlich
115. According to the class lecture and the text Wall Street bankers
opposed the Second Bank of the United States. Their opposition was based
on the idea that the Second Bank
a. lent too freely to the federal government.
b. followed a monetary policy that favored stable prices even at the
cost of a slower growing economy.
c. followed a monetary policy that kept interest rates too high.
d. favored Philadelphia because that was where the head office of the
bank was located.
116. Land-policy "liberals" in the 19th century
a. believed that the sale of the public domain should provide
substantial government revenue.
b. voted against the Homestead Act of 1862.
c. supported the sale of the public domain at low prices.
d. were against the extension of credit to land buyers.
117. Which statement best describes the trend in land allocation laws
from the Land Ordinance of 1785 to the Homestead Act of 1862?
a. The changes were more favorable to those who held a conservative
belief about land allocation.
b. The changes were more favorable to those who held a liberal belief
about land allocation.
c. There was no consistent trend in the changes; some changes favored
the conservatives and others favored the liberals.
118. The problem with the General Maximum Price Regulation of World War
II was....
a. the government kept changing its mind about which prices to control
23
b. demand shifted from the controlled to the uncontrolled sector
c. firms were given too much discretion in setting prices
d. it was not legally enforceable, but rather relied on appeals to
patriotism
119. What industry was the main economic impetus behind antebellum
migration to the West Coast?
a. fishing
b. cattle
c. fruit
d. mining
120. During World War II candy makers evaded price controls by
a. threatening to fire low-paid workers unless the official price was
raised
b. substituting inferior ingredients, reducing the size of the candy
bar, and selling at the official price
c. refusing to supply the military unless granted price increases in
the civilian market
d. selling M&Ms that melted on the fingers and not in the mouth
121. According to quantitative estimates of the burden of the
Navigation Acts on the colonies, what can be said about the (net) effect
of the Acts ?
a. The Navigation Acts placed a serious economic burden on the
colonies, with estimates of this burden equalling roughly 40 percent of
1770s GNP.
b. The Navigation Acts were the critical reason why colonists revolted
against the British.
c. After accounting for the protection provided by the British through
their navy, there was very little economic burden to colonists from the
Navigation Acts.
d. Existing data do not allow for credible estimates of the economic
burden of the Navigation Acts on the colonies.
122. A sign of a bubble in the stock market (one that was present in
both the 19020a and the 1990s) would be a ____ that was ____ the rate of
return on government bonds.
a. dividend/earnings ratio (dividends divided by earnings), less than
b. dividend/price ratio, less than
c. dividend/earnings ratio, more than
d. dividend/price ratio, more than
123. According to the official figures real GDP per capita was higher
during World War II than it was at any previous time, and for many years
to come, which implies perhaps that a wartime economy is better than a
24
peacetime economy. According to the class lecture this figure is
probably an ______ because the ______.
a. overestimate of the true figure, measured price level understates
the true price level
b. underestimate of the true figure, measured price level understates
the true price level
c. underestimate of the true figure, measured price level overstates the
true price level
d. overestimate of the true figure, measured price level overstates
the true price level
124. According to the class lecture and the text (which follow the work
of Christina Romer), the major initial impact of the stock market crash
of 1929 on the economy was on
a. agriculture
b. investment spending
c. state and local government purchases
d. consumer durable purchases
125.A nation practicing mercantilism aims to
a. keep the government out of the economy.
b. establish an excess of exports over imports.
c. balance imports with exports.
d. replace gold and silver with paper money.
e. reduce the size of the military sector.
126.According to the mercantilists, colonies were supposed to export
____ and import ____ from ____.
a. manufactured products; raw materials; the mother country
b. raw materials; manufactured products; countries outside the empire
c. manufactured products; raw materials; countries outside the empire
d. raw materials; manufactured products; the mother country
127. According to the class lectures a federal minimum wage law was
first established in ____. Support was stronger from representatives
from ____ -wage states.
a. Great Depression, high
b. World War II, high
c. Great Depression, low
d. World War II, low
128. Albert Fishlow coined the term ___ to refer to the idea that ___.
a. anticipatory settlement, railroads had to provide the initial
capital for farmers
b. anticipatory settlement, farmers moved into areas in advance of the
completion of the railroad
c. privatization of infrastructure investment, state government
25
financed railroads indirectly by endorsing railroad securities
d. privatization of infrastructure investment, railroads sold bonds to
farmers who lived along the right of way
f. I know there was a question like this on one of the old exams, I
just can't remember it.
129. Albert Fishlow argued that if the railroads were built ahead of
demand we would observe initial profit rates for the railroads that were
very ______ and initial population densities that were very _______.
a. low; high
b. high; low
c. low; low
d. high; high
130. Albert Fishlow found that the initial profit rates earned by
midwestern RRs were very ______ and initial population densities in
the vicinity of the RRs were _______ densities near rural RRs in the East.
a. low; low compared with
b. high; about the same as
c. low; about the same as
d. high; low compared with
131. Fogel based his counterfactual world of 1890 on
a. supply and demand curves derived from statistical tests
b. supply and demand curves assumed on the basis of economic theory
c. an assumption that the existing canal and waterway network could be
deepened and improved to handle all 1890 shipments
d. canals and other waterway improvements proposed by the Corps of
Engineers
132. The greatest advantage of the railroad over earlier forms of
transportation was its speed and its ability to stay open throughout the
winter. Robert Fogel attempted to measure these advantages by examining
___.
a. the profits of transportation industries as a group
b. the profits of railroads compared with the profits of canals
c. employment of labor and capital in the transsporation sector before
and after the railroad
d. inventories of agricultural products held in eastern markets
133. When the railroads came to the Middle West many farmers rejoiced
because they didn't have to waste so much time and money hauling their
wheat to market in wagons. To measure this benefit of the railroads
Fogel examined
a. agricultural wages
b. rents on farm lands
26
c. the gross value of farm output
d. all of the above
Correct Answers
1D
2C
3B
4A
5C
6D
7A
8D
9C
10 A
11 B
12 D
13 D
14 D
15 C
16. B
17. D
18. A
19. B
20. B
21. B
22. C
23. B
24. D
25. C
26. D
27. C
28. B
29. A
30. B
31. D
32. C
33. A
34. D
35. B
36. C
37. C
38. D
39. A
40. A
27
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
C
A
B
A
C
C
B
A
D
D
C
B
E
C
D
D
D
C
D
C
C
C
D
D
D
D
C
A
A
A
A
C
C
A
C
D
B
B
D
D
D
C
A
D
C
B
28
87. C
88. B
89. B
90. C
91. B
92. C
93. C
94. B
95. B
96. A
97. B
98. D
99. C
100. C
101. D
102. D
103. D
104. D
105. B
106. D
107. A
108. A
109. B
110. C
111. C
112. D
113. C
114. A
115. D
116. C
117. B
118. C
119. D
120. B
121. C
122. B
123. A
124. D
125. B
126. D
127. A
128. B
129. C
130. B
131. D
132. D
29
133. B
30