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1 NAME: STUDENT NUMBER: RYERSON UNIVERSITY DEPARTMENT OF ECONOMICS ECN220 : Evolution of the Global Economy 1½ Hours Midterm Test 14 February 2008 Section I : Short Answer Questions (4 marks each - total 12) Answer three of the following questions in the spaces provided. If you answer the questions in the booklet instead of the test paper there will be a penalty of 1 mark per question and if you answer more than three questions only the first three (not necessarily the best three) will be marked. All questions in this section are of equal value. 1 Briefly describe three reasons why many primary producing countries during the 1920s experienced low and unstable export prices. Increased production of food during the war by food importers resulted in overproduction once the war was over; (2) Increased agricultural productivity (due to new technology) worsened the problem of overproduction; (3) As predicted by Engel’s Law, rising incomes caused a shift in consumption away from cereals and toward more income-elastic products. 1
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Explain why German reparation payments were essential to the survival of the international financial system in the 1920s. The western powers were unable to acquire sufficient dollars to pay their US debts through exports to the United States, which had protectionist policies. They acquired the necessary funds through reparations payments from Germany, which then borrowed from US investors. 3 When the gold standard disintegrated in 1933 it was replaced by a series of “currency blocs”. Indicate and briefly describe three of these “blocs”. Three of the following: (1) The Sterling Area, which used the pound sterling for settling international payments. Included most British Commonwealth countries, smaller European countries, and Middle Eastern countries. (2) The Dollar Area, which used the US dollar for settling international payments. Consisted of the United States, Canada, and Latin America. (3) The Exchange Control Area, which consisted of Germany and several countries in central and eastern Europe. This involved a complex system of exchange controls and bilateral agreements. (4) The Gold Bloc. Some countries (notably France and Italy) remained on the Gold Standard until 1936. 2
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This test prep was uploaded on 04/18/2008 for the course ECONOMICS ECN 220 taught by Professor Jolly during the Winter '08 term at Ryerson.

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