test 3 study guide

test 3 study guide - ECON 2200-Moore Study Guide for Test 3...

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ECON 2200-Moore Study Guide for Test 3 Test #3 will be held in our regular classroom on Monday, Nov 12. The test will cover the following sections of the syllabus: The Reunification Era: Southern Stagnation, Western Expansion & the Industrial Revolution (c. 1865-1920) Money and Banking after the Civil War Walton & Rockoff, Chap 19 (especially pp. 377-383, which were not covered on Test 2.) Rockoff, Hugh, “The Wizard of Oz as a Monetary Allegory,” The Journal of Political Economy , Vol. 98, No. 4, (August 1990), pp. 739-760. Boom and Bust (c. 1920-1946) The Economy of the Roaring Twenties Walton & Rockoff, Chap 22 The Great Depression Walton & Rockoff, Chap 23 (Note: Coverage of Chap 23 will be continued on the final exam.) 1. Other than metal coins, what types of money circulated in the U.S. in the late 1800s? If the U.S. had a bimetallic standard, why did it operate on a de facto gold standard for most of the late 1800s? When did the U.S. officially adopt a gold standard, and how long did it remain on the gold standard? Other types of money that circulated in the late 1800’s was state bank notes, national bank notes, greenbacks, demand deposits, and bimetallic coins. Silver was undervalued at the market so instead of keeping it in the currency to simplify the money system the US eliminated the use of the silver dollar. The US officially adopted gold as the standard currency in 1900. 2. Use Figures 19.1 and 19.2 to discuss the relationship between the money supply (M) and the price level (P) in the late 19 th century. Both figures support many of the issues of the time that we’ve learned about. Figure 19.1 shows the de facto standard, greenbacks, and national bank notes being issued in the civil war, a decrease in gold value and an increase after 1895. Figure 19.2 shows wholesale prices and the cost of living. The graph shows that both increase with the civil war and decline afterward due to the deflation we’ve learned about in the previous two tests. As the amount of gold increased the cost of living decreased. 3. During the Civil War, the U.S. was forced to suspend payment of specie. Why? What had to happen in order for specie payment to resume following the War? Using the QTM, describe and explain the differing views of Republicans and Democrats on this issue. Describe the actual events that eventually led to resumption of specie payment in 1879. (Use data from Table 19.2 to support your answers.) As a result of the US financing the civil war, the price level went up making imports more attractive. The US used gold to pay the imports instead of the high inflationary dollar. This
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caused a trade deficit. The lack of gold led to the US suspending specie payment (gold payment on greenbacks). To resume specie payment, the US price would have to decrease in order to stop the outflow of gold. Both democrats and republicans agreed that price level had to be lowered but they disagreed on how to do it. The republicans wanted a severe contraction of money. Severely
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test 3 study guide - ECON 2200-Moore Study Guide for Test 3...

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