2nd Exam Review

Question 1

Which of the following interest groups, according to economic historian Gary Libecap, was particularly important (had a lot of clout) in getting the Sherman Antitrust Act passed? (Reading Question)

Answer 1

Cattleman’s associations.

Question 2

The text discusses the rapid advance in industrial technology after the Civil War. To take one example, the text concludes that the open-hearth process for making steel rapidly replaced the Bessemer process because the open-hearth process was _______. (Reading Question)

Answer 2

slower, permitting adjustment of the steel’s chemical composition

Question 3

advantage of open hearth over bessemer

Answer 3

slower, permitting adjustment of the steel’s chemical composition

Question 4

One major cost of the classical gold standard compared with modern monetary systems was that _____.

Answer 4

central banks might not have enough gold to alleviate a panic

Question 5

According to the class lecture, the growth of democracy (the working class was allowed to vote) _____ support for the gold standard because ______.

Answer 5

reduced, there was more support in the electorate for using paper money to fight unemployment

Question 6

Under the “rules of the gold standard game” if a country was experiencing a balance of payments deficit (an outflow of gold) the central bank was supposed to _____.

Answer 6

raise interest rates

Question 7

In the late nineteenth century followers of William Jennings Bryan hoped to benefit from adopting bimetallism because it would produce inflation and so reduce the burden of their debts. But they probably overestimated the benefit to them of inflation, because they failed to take into account the “Fisher effect” which says that ________. (Reading Question)

Answer 7

inflation would produce higher interest rates

Question 8

The Panic of 1873 was triggered by the failure of Jay Cooke and Company which had invested heavily in _____.

Answer 8

The Northern Pacific Railroad

Question 9

Canada has had ______.

Answer 9

no financial panics

Question 10

One of the weaknesses built into the Federal Reserve System when it was established in 1913 was, according to the class lecture, that _____.

Answer 10

Federal Reserve District Banks were given too much power when it came to setting interest rates and bailing out banks

Question 11

Which of the following men is considered, according to the class lecture, to be the intellectual father of the Federal Reserve?

Answer 11

Paul Warburg

Question 12

According to “Bagehot’s rule” the best way to respond to a panic is for the central bank to _____.

Answer 12

lend freely to financial intermediaries at high interest rates

Question 13

What did Coxey’s Army demand? (Lecture and Reading Question)

Answer 13

a federal road building program financed by printing money

Question 14

The “Crime of 1873” was the decision by Congress to _____. (Reading Question)

Answer 14

omit the silver dollar from the list of legal tender coins

Question 15

In class I discussed several events that contributed to the Panic of 1907. Which was not among them?

Answer 15

The failure of the cotton harvest in the South.

Question 16

After the Civil War two experiments were made with land reform at _________. These experiments are generally regarded by economic historians as _______ .

Answer 16

the Jefferson Davis plantation and the Sea Islands of Georgia, successes

Question 17

In class I argued that the “gang system” of agriculture was rarely used in the North before Northern emancipation because _____.

Answer 17

it wasn’t feasible to use the “gang system” on farms that cultivated a mixture of crops and livestock.

Question 18

If the cash price of corn is $.25 per bushel and the credit price (due in six months) is $.35 per bushel, then the implicit interest rate is about

Answer 18

80 percent

Question 19

Economic historian Robert Margo found that in 1910 southern states _____. (Reading Question)

Answer 19

spent far more on white students than on African American students

Question 20

Under the agricultural system that prevailed in the South after the Civil War the sharecropper often made use of the crop lien law. This law allowed sharecropper to

Answer 20

contract a debt by pledging part of a future crop

Question 21

After the Civil War the southern sharecropper was often tied to the land by an economic system similar in some ways to, although less onerous than, slavery, and known to economic historians as ______.

Answer 21

debt peonage

Question 22

Soil erosion and became a major problem in the South after the Civil War. In class I attributed this in part to _____.

Answer 22

excessive reliance on cotton due to debt peonage

Question 23

The “Engerman-Sokoloff thesis” attributes the historical backwardness of the Southern educational system to _____.

Answer 23

control of educational spending by landowners intent on maximizing profits from production of labor-intensive cash crops

Question 24

The farmer’s “terms of trade” worsened between 1870 and 1895. Of the following which explanation of this phenomenon is most consistent with the class and text discussions?

Answer 24

Rising world supplies of agricultural products reduced the real price of agricultural products.

Question 25

In class I argued that farmers found it easier to understand how agricultural markets worked before the Civil War than after because before the Civil War

Answer 25

smaller than average crops were generally associated with higher prices

Question 26

In class I noted that during the Populist era shifts in the “rain line” fooled many pioneers. Another way of saying this is that the Populist farmers had mistakenly bought _____.

Answer 26

land where frequent droughts made it hard to grow crops

Question 27

What previously neglected factor did economic historians Alan Olmstead and Paul Rhode show was important for increasing productivity in agriculture after the Civil War? (Reading Question)

Answer 27

Improved seeds for crops.

Question 28

1869 the “golden spike” was driven into the ground. This symbolized _____.

Answer 28

the completion of the Union Pacific Railroad uniting the eastern and western parts of the United States

Question 29

Consider the following table of values for the private rate of return and the social rate of return to capital invested in the Atlanta Pacific railroad. (These are not the actual figures shown in class for the Union Pacific, but rather a slightly different set of figures to test your understanding.) Given these figures we can conclude that the railroad was _____ and that government subsidies were _____.

Answer 29

built ahead of time, justified.

Question 30

Soon after it was completed the Union Pacific railroad got into financial difficulties. In class I attributed this in part to _______.

Answer 30

corruption that inflated the costs of constructing the railroad

Question 31

The text discusses the productivity of the railroads over the period 1870 to 1910 and concludes that there was ________. (Reading Question)

Answer 31

a considerable increase in productivity because of economies of scale, more powerful locomotives, etc.

Question 32

In the Supreme Court Case, Munn vs. Illinois, the court decided that _____. (Reading Question)

Answer 32

it was O.K. for Illinois to regulate the prices charged at Munn’s grain elevator

Question 33

Robert Fogel’s conclusion from his study of the impact of the railroads was that _____.

Answer 33

even without the railroads the U.S. would have been a rich nation, but the railroads still made a positive contribution

Question 34

One of the greatest advantages 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 the impact of these advantages for eastern wholesale distributors and retailers of commodities by examining _____. (Lecture and Reading Question)

Answer 34

inventories of agricultural products held in eastern markets

Question 35

Robert Fogel “constructed” counterfactual canals and wagon roads in order to better measure the social savings from the Railroads. The amount that Fogel invested in these counterfactual canals represented _____.

Answer 35

what was actually spent on the railroads

Question 36

Part of the advantage of the railroad over the canal was that the cost of carting wheat from the farm to the major shipping point would be reduced for many farmers. According to Fogel, this advantage would show up in the form of _____.

Answer 36

higher rents on farm land

Question 37

Adam Smith used the example of _____ to illustrate how the specialization made possible by the factory system increased production.

Answer 37

a pin factory

Question 38

According to Alfred Chandler the key economic development (among those listed below) leading to the growth of vertically integrated giant corporations in the period 1869-1893 was ________.

Answer 38

the rise in the use of continuous-flow technologies

Question 39

To assure himself an adequate supply of tobacco James Buchanan Duke changed industry practice by _____.

Answer 39

contracting directly with farmers for tobacco

Question 40

According to Ida Tarbell, John D. Rockefeller’s Standard Oil got control of independent refiners by ______. (Lecture and Reading Question)

Answer 40

offering independent refiners a share of the profits to be made from monopoly and efficiency

Question 41

“40 acres and a _____.”

Answer 41

mule

Question 42

Folksong about post-Civil War poverty in the South:
“Seven cent cotton and forty cent meat. How in the world _____.”

Answer 42

can a poor man eat

Question 43

A folksong about a transcontinental railroad train:
“She is as graceful as a comet, and swift as a waterfall, She is the Western Combination, _____.”

Answer 43

Wabash Cannon Ball

Question 44

This city became “Hog Butcher for the World.”

Answer 44

Chicago

Question 45

The history of racial segregation in the United States can be described as:
“The Strange Career of _____.”

Answer 45

Jim Crow

Question 46

When pioneers thought that western land was too dry to grow crops on, they were told that “rain follows _____.”

Answer 46

The Plow

Question 47

When asked what the stock market will do, J.P. Morgan is reputed to have said, “_____.”

Answer 47

It will fluctuate

Question 48

When their dreams of a new life on the frontier turned to dust, pioneer farmers wrote this slogan on their “prairie schooners”: “In God we Trusted, _____.”

Answer 48

In Kansas we Busted

Question 49

In what year was the Sherman Antitrust Act Passed?

Answer 49

1890

Question 50

Name three famous 19th century “Robber Barons.”

Answer 50

Rockefeller, Duke, Hershey, J.P. Morgan, Carnegie, J.P. Morgan

Question 51

(5 points) Name one advantage of the classical gold standard (1879-1914) and one disadvantage.

Answer 51

Advantage

• Fixed Exchange Rates
• Fixed Long Run Exchange rates
• Price stability

Disadvantage

• A central bank may not have enough gold to fight a panic
• A central bank may not be able to use low interest rates to fight unemployment

Question 52

A freedman in the Postbellum South must choose between renting a farm for cash or renting it for a share of the crop. The farm is expected to gross about $1000 when worked by the average tenant in an average year. The rent is $500, or, the required share is 1/2. Name one advantage of renting and one advantage of sharecropping that might accrue to the renter if they choose that form of tenancy.

Answer 52

renting

• Renter reaps the advantage of hard work
• This will be important to a potential renter who has some savings (or a network of friends and relatives)

sharecropping

• Share’s the risk of a bad harvest or low prices
• Information about farming, reduces “absentee landlord” problem
• Protection from the Ku Klux Klan

Question 53

Consider the following diagram which shows the increase in the supply of cotton as a result of the “cotton-lock-in.”

• Identify the area (by identifying the corners of an area) that represents the gain to consumers from the imposition of the sharecropping system in the South.
• Identify (by naming the endpoints of a line segment) the change in price resulting from the imposition of a regime of sharecropping.
• Identify (by naming the endpoints of a line segment) the change in quantity resulting from the imposition of a regime of sharecropping.

Answer 53

• ABFD
• AD or BE
• HI or EF