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Alle Oberthemen / Economics / History of Economics

Econ 2200 Exam 3 (54 Karten)

Sag Danke
1
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What year was the Fed created in?
1913
2
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How do we know the Fed is the Central bank (5 functions)?
1. lender of last resort
2. clearinghouse
3. fiscal agent for the federal government
4. exercises macroeconomic policy
5. serves as a bankers' bank
3
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Was the early performance of the Fed good or bad?
bad
4
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What were the 5 types of money in circulation following the Civil War?
SB notes
NB notes
greenbacks
demand deposits (checks)
coins (bimetallic standard, but de facto gold std)
5
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What is the dominant issue of the late 1800s?
What kind of monetary system should the US have?
6
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What is the Quantity Theory of Money?  What is the restated version?  What does the restated version tell us?
MV=PY

M=kPY

says that since velocity is constant, M can affect both P and Y
7
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What was the general trend in prices cost of living from 1860 to 1914?
Prices and COL fell until the 1890s, then rose until WWI
8
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During the Civil War, the US experienced a           % increase in the Price level compared to a          % increase in England.  This caused a trade deficit that was somewhat mitigated by an increase in                                                  .
76%
5%

the price of the British Pound in the US
9
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During the Civil War:
1) US prices (< or >) international prices
2) Exports from the US were (inc/dec) and imports (inc/dec).
3) Gold flowed out of the US to pay for the                              .
4) Payment of species (               ) suspended.  Greenbacks become the fiat currency.
1) >
2) dec, inc
3) trade deficit
4) gold
10
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T/F: Both the Democrats and Republicans believed that decreasing the price level to resume specie payment was desirable, but they differed on how.
True
11
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The Republics were proponents of Severe Contraction, which called for a significant cut in       which will result in a significant cut in the price level.
M
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The Moderate Contraction stance was held by democrats, which anticipated an increase in growth in the money supply (Y).  So as Y goes up, slowly   1    will go down.  Therefore, hold     2    constant and     3   will fall gradually as the economy grows.
1) P
2) M
3) P
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What does the 1865 Contraction Act do?  What were the effects?
It brought M down quickly and led to a sharp decline in P. 

Too severe on debtors.  Prices in the US were still higher than the rest of the world.
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After the 1865 Contraction Act, what did the Treasury Department do to fix the price level?
They adopted the Democratic approach of holding M constant.  The Act was abolished.  The US later resumed payment in gold for greenbacks in 1879. 
15
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From 1879 to 1900, the US has a defacto                standard.  After 1879, US and British                                        were about the same.
gold

price levels
16
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Understand the Crime of '73.
Answer
17
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Who were the Sound Money Advocates and who represented the Free Silver Movement?
SMA - Republicans, banking, financial institutions, urban

FSM - Democrats, West and South, rural (farmers)
18
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The Bland-Allison Act of 1878 was a compromise between the two groups.  What did it do?  What happened to the price of silver?
Treasury to purchase between $2-4 million of silver per month at market price. 

Price of silver continues to fall, despite this.  Supply increases more than demand, so prices fell.
19
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What did the Sherman Silver Purchase Act of 1890 do?  Where did it fail?
Treasury to buy 4.5 million ounces of silver at market price (per month).  The seller receives Treasury notes that are legal tender and redeemable for gold or silver at the discretion of the Treasury.  The treasury tended to redeem in gold b/c they wanted to maintain a gold standard.

Silver prices continued to fall.  Since the treasury tended to pay out in gold, gold reserves fell.  They were close to being forced to suspend payment in specie for al paper money, which would be leaving the gold standard, unless something happened.  This caused the act to get repealed by Grover Cleveland.
20
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President Grover Cleveland was a Sound money                  .  He wasn't nominated for re-election b/c the repeal was against his party's feelings. 
Democrat
21
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The 1896 election centered around what type of monetary system the US should use.  It was between                   who was a democrat for free silver and                     who was a sound money Republican.
Bryan (D)

McKinley (R)
22
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After 1896, the US had a trade               .  Gold flowed (into/out of) the US.
surplus

into the US
23
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When was the "Golden age of American Agriculture"?  What did this mean for silver?
from 1896-1920

Farmers no longer cared about silver and reflationists b/c they were no longer dissatisfied.
24
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In 1900, the Gold Standard act did what?  What is the value in gold of a dollar?
legal adoption of gold standard

25.8 grams of 90% pure gold

At this point, most paper monies issued by the federal government were redeemable in gold.
25
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[WOZ] What does Dorothy represent?  Where does the cyclone carry her?
America, from Kansas, where the Populist movement started

to the Wicked Witch of the East
26
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[WOZ] Who is the Wicked Witch of the East?  Why wicked?
Sound Money interests, probably Grover Cleveland. 

Wicked b/c he went against his people (Dems) to abandon silver.
27
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[WOZ] Why is the place, Land of Oz, special?
Land of Oz - land of ounces -- as in gold!
28
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[WOZ] Who is the Good Witch of the North?
the pockets of Populist support in the North (supported FSM)
29
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[WOZ] Silver Shoes?  Yellow brick road?
By walking on the road with her shoes, she is supporting a bimetallic standard.
30
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[WOZ] Who is the scarecrow?
American Farmer

Has the ability to make change, but doesn't think he's smart enough.
31
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[WOZ] What represents the Tin Woodman?  Why is he rusted? 
Urban manufacturing

Because of the unemployment, he is rusted and cannot work.
32
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[WOZ] Who is the Cowardly Lion and why is he cowardly?
Bryan - lion b/c he is a great orator.  Cowardly because he abandoned his position for the 1900 election.
33
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[WOZ] Explain the Deadly Poppy Field.
Cowardly lion falls asleep (Bryan on his bimetallic stance).  Bryan supports foreign policy (poppy field is foreign).  Little mice pull him out (his former supporters would have supported him if he had stayed true to Bimetallism)
34
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[WOZ] Explain the Emerald City and the green colored glasses.
Emerald city = Washington DC

Green colored glasses must be worn, held together by a gold buckle. 

7 passages and 3 stairways = Crime of '73 (outraged populists)

35
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[WOZ] Explain the Wicked Witch of the West, her Golden Cap & her pursuit of the silver shoes.
WWoW = McKinley

Hanna told McKinley to go west and sit on his front porch and give speeches to make him look like a down to earth guy.  This is why he is the witch of the WEST.

Golden Cap?  The source of SMA power, the gold standard.  The source of the WWoW's power.  If Dorothy loses even one silver shoe, she (Dorothy) loses all of her power.  Illusion to wanting to remove Bimetallic standard.

The Republican rhetoric was "We support Bimetallic standard, but we need support from other countries."  Populists realized this wasn't sincere.
36
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[WOZ] Explain Dorothy's defeat of the WWoW with a bucket of water.
1) Throwing money (through silver) at inflation would be good

2) When it rains, farmers are thankful.  Farmers are mostly populists.
37
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[WOZ] Explain the Wizard's response to Dorothy and friends on their return to Oz.
Wizard of Oz doesn't follow through.  He says he'll take her home in a hot air balloon (Republicans are full of hot air).  He then escapes in his balloon.
38
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[WOZ] Glinda, the Good Witch of the South.
Glinda tells Dorothy to click her heels three times together.  Use your SILVER shoes!  Reinsert silver into the money supply and all will be right!
39
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T/F: Populists wanted a silver standard.
False - wanted a bimetallic standard
40
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[WOZ] Explain The Wizard of Oz and his initial response to Dorothy and friends' requests.
Wizard of Oz = Marcus Alonzo Hanna --> campaign director for McKinley

Hanna was very rich and the chairman of the Republican National Committee.  He was the brains behind McKinley's campaign.

Wo Oz says to kill the Wicked Witch of the West and he will help.
41
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T/F: Bryan was right in the end about the QTM, but it didn't go the way he wanted.
True - Discoveries from around the world of gold.
42
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How could inflation hurt farmers?
They borrow too much and get themselves into deeper debt.

Since loan durations were usually short, they would hurt the farmer in the long run.
43
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What did Bryan say in his Cross of Gold speech?
The Common man wants bimetallism while the idle wealthy want only the gold standard.  While Republicans say they want bimetallism, they are lying because if bimetallism is a good thing, then the US should adopt it and other countries would follow suit.
44
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What did the MacNary-Haugen bills say?  What happened to them?
They provided subsidies to farmers from the gov.  They were vetoed by president Harding, twice.
45
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What did the Agricultural Marketing Act of 1929 do?
government responsible for stabilizing farm prices
46
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What did the Smoot-Hawley Tariff Act do?
Protected farmers from imports via tariffs
47
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What did the Fedearl Intermediate Credit Act do?
eased borrowing trouble for farmers
48
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Where the rich getting richer and the poor poorer?  Some say yes, like who?  Why could this have led to the Great Depression?
Charles Holtz

Rich getting more and more money but not spending it fast enough to keep up Aggregate Demand
49
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Rich getting richer/ poor poorer?  Who says no?  Why (3 reasons)?
Gene Smiley

1) tax rates were decreasing from the wealthy

2) WWI put a slow on increasing inequality of income

3) sometimes income is not a great measure of standards of living or inequality; most people improved their standards of living without significant increase in income (credit)
50
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Fiscal Policy - WWI saw high levels of taxes.  What did the R want to do about it (2 things)?  What about the Democrats (lower taxes for: [2 things])?  Whose fiscal policy won?  Was it successful?
Republicans - lower tax levels to:
1) encourage savings
2) rich would invest in taxable assets instead of tax free municipal bonds

Democrats - lower taxes for:
1) low income families
2) individuals and corporations

Democrats won.  It was very successful.  Surplus budget.
51
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T/F: Besides the two small recessions in 1920 and 1921, later in the 20s there was an increase in real income and stable prices.
True
52
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What were some general Fed policies during the 20s? (4)
1) let the weak bank fail - mostly rural banks
2) attempt to end speculation in stock markets - fewer call loans asked of New York banks, but other banks took over.
3) Increase the discount rate 4.5-5.5% - showed intent to limit credit
4) set margin requirements on investments - the amount of money you must put up front to make an investment
53
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What were the two major world problems at the time?
1) German forced to pay for WWI damages to Allied forces
-put a large strain on German economy
-Hyperinflation and unable to make payment schedule
-US attempted to give them large loan to stabilize the economy through the Dawes Plan
-Young Plan reduced the size of payments

2) Return to the Gold Standard
-would help fix exchange rates and prevent inflation
-Britain was a fan b/c it would return them to pre-war financial dominance; actually backfired since Pound was over-valued at the mint (fucked them over)
-US could have helped if they allowed the gold into the US
-this would have increased US price levels
-chose to "sterilize" or stop the gold inflow
-US did not take into account international backlash
54
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Where did the Great Bull Market of the 20s come from?
-consumer durables
-speculation
-credit (call loans, high demand for loans)
-investing on margin
Kartensatzinfo:
Autor: savhighsmith
Oberthema: Economics
Thema: History of Economics
Schule / Uni: UGA
Ort: Athens
Veröffentlicht: 15.11.2010
Tags: Moore, 1870s-1930
 
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