ECON 2200 Test #2 Study Guide

ECON 2200 Test #2 Study Guide - The Rise of Big...

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The Rise of Big Business (1865-1920) NOTE: Study Table 17.3 for test. Think about mass production, mechanization, income elasticity (malt liquors and tobacco), and how changes reflect the transformation of the US economy. NOTE: Study pages 328-335 for test. B. Why the growth of "big business"? VI. Antitrust Legislation & Judicial Interpretation (Please cover on your own p. 341-345) Money & Banking after the Civil War (Ch. 19) 2 Key Issues Deflation Bank Panics & Bank Failures B. National Bank Act (1863) (p. 370-372) III. Bank Reforms & the Federal Reserve System (read 383-387) A. 1882 & 1890: More lenient requirements for NB charters
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Field Questions: 1. Both the railroad (RR) and the telegraph created an increasingly “connected” American economy during the Reunification period. Compare these two industries in terms of costs, employment and energy requirements. a. Railroad cost more b. Railroad employment higher (over 500,000 for railroad and only 50,000 for telegraph) c. Railroad energy requirement much higher (53% of energy used for RR) d. 56,000,000 messages in 1890 for telegraph e. Telegraph neglected because it’s smaller firms 2. Why, according to Field, do the costs and benefits of the telegraph deserve scholars’ attention, particularly when examining long-term economic growth? a. If we’re trying to assess rises and falls in business cycle (short-run), Field argues RR construction is a good proxy. Because RR was so big, it followed the economy (GDP). b. However, in considering long-run economic growth we evaluate the social rate-of-return of an investment This is nature of telegraphs’ contribution. c. Important to look at the benefits versus the cost of the telegraph 3. In the late-19 th century, messages containing data/information could be transmitted either by mail (often carried by RR) or by telegraph. a. Compare the costs of each type of transmission. telegraphs were more expensive telegraph (1890) cost $1.00 ° $1.00 would be worth about $23.00 today letter (1890) cost $.02 b. List the factors that determine the economic value of a message. Expected mean time RR delivered postal, so mean time was higher than telegraph Variance between times How likely is it to get there in the mean time? RR might break down and then the mean time would not matter. Content of the message Letter to grandmother versus important business information. Point of origin and destination 4. Why does Field think care must be exercised in estimating the contribution of the telegraph to long-term growth? (Think about private benefits v. social benefits of data transmission.) a. Private Benefits Time sensitive information Even if it’s letting a family member know that lives far away about a recent death. This would have high private (individual/personal) value, but low social value. b. Social Benefits Time sensitive information Business info that would effect stock, etc. However, after everyone knows about the telegram, everyone can do it too. Like standing up at a game is great personal benefit, but once everyone else does it too, it really has no benefit anymore.
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