SP14 Exam 2 ReviewEconomics 4130SP14 Exam 2 ReviewThe exam will have 7, 10-point questions on it from the questions below.1. What is the Malthusian Model? Explain how it describes population changes in Europes’ First and Second Logistics. Give examples of positive checks and preventative checks. What is Malthusian Model?The Malthusian Model. Reverend Thomas Malthus described this process in Principles of Population (1798). Basically a diminishing returns story; growth is limited by a society’s resources.1. The primary resource is food.2. The law of diminishing returns is inevitable. Cultivation of new lands and intensification of labor in response to demographic growth adds progressively smaller increments to production for each additional unit of land orlabor.3. As population grows, it eventually strains on the food supply.4. Eventually food becomes scarce and population growth must be “checked.”- Positive checks (excess mortality): famines, epidemics, wars- Preventive checks: population changes behavior to lower fertility--later marriage, birth spacing, infanticide.5. Production or productivity increases provide only temporary relief. Any grains from invention or innovation are inevitably canceled by demographic growth. Europe’s Second Logistic (Figure 1-2, page 18)A. Restoration of Growth in Population around 1450.1. Decline in disease due to increased natural immunity.--natural selection.2. Rising real wages/better nutrition/increased life expectancy.3. Earlier marriage/higher birth rates. B. Stagnation of population in 1600s1. Wars: The Thirty Years War (1618-1648). Between 1600 and 1650 population in Germany fell by 4 million from 16 to 12 million.2. Epidemics: catastrophic mortality due to disease and food shortages. While people became more resistant to the plague, the germs also mutatedand became stronger, as population grew, food eventually became scare, people became more susceptible.3. Fertility declines: changes in nuptiality-- later marriage, attempts to space births, abstinence.2. What were the 2 necessary conditions for European explorers to sail around Africa and across the Atlantic? Explain briefly why each was crucial to long-distance sailing. What was the price revolution? For whom was it detrimental?The necessary conditions--technological advances in shipbuilding and navigation:1. full-rigged ships--larger could carry more men and cargo for longer voyages, as well as could better capture currents.2. celestial navigation--need to use stars to keep on course, otherwise drift off course during the night.Price Revolution--Over the 16th century, prices rose by 300-400%. Why is inflation “bad”? - Loss in wealth. Those already holding specie had its value eroded. - Falling real wages --wages tend to be sticky, rise less rapidly than prices, erosion of purchasing power.For whom was it detrimental?----Spain ------Urban nature of Italy made it particularly susceptible to the Price revolution and plagues because of its relatively higher population density.3. Describe the impact of the efforts of Prince Henry the Navigator (1418-1460) on the Portugese economy? What was the impact on intercontinental trade of the successful voyage of Vasco da Gama (1497-1499)? Contrast Portuguese colonization of Africa and Asia with that of Spain in the New World.Efforts of Prince Henry the Navigator from 1418-1460.a. Reached Cape Verdeb. Profitable trade in Ivory, Gold, and slaves.4. Why did the manorial system persist so much longer in Russia than in Northwest Europe? Why did Italy’s economic development lag behind that of Northwest Europe? Why did Scandinavia’s development also lag?5. Why does J.U. Nef characterize the 16th Century as a First Industrial Revolution in Great Britain? (Hint: list the 3 characteristics of an industrial revolution according to Nef and provide the relevant examples of each).A. New industries1. Paper mills2. Gunpowder mills3. Cannon foundries4. Iron and Copper5. Sugar refineriesB. New Techniques1. Mining2. Pumping water out of mines.C. New Technology—Conversion of wood to coal as basic source of fuel.6. Provide 5 detailed ways in which the Chinese economy was more advanced than the European economy in the premodern era.Fourteen fifteeen sixteen hundred printing what insitutions favorable7. Explain Kenneth Pommeranz’ explanation for the “Great Divergence.” In particular, explain how differential factor endowments and having to simultaneously meet the following needs played a role: food, fuel (for both warmth and eventually as a source of energy), clothing, and building materials (wood vs. iron)Hardest QuestionIntroduction China EuropeanStable diet cold fuel what happened china building materials8. The evolution of economic organization from hunter-gatherer to settled agriculture to more complex civilizations proceeded at vastly different pacesin different parts of the world. Explain why the pace of development on the Eurasian landmass was so much more rapid than in Africa and the Americas.Describe and explain Australian development before European settlement.---- figure -9. Explain how each of the following contributed to the Conquistador’s successin the New World: the invention of the printing press, domestication of animals, and their ancestors’ experience in the Crusades.Germs guns steal technology PBS transcipt video10. What are the basic principles of Mercantilism? Contrast mercantilism with principles of mercantilism with that of neoclassical economics. List and briefly explain 4 mercantilist policies typical of pre-modern governments.11. Explain debt repudiation as practiced by the Spanish monarchy in the premodern era. Why was excessive borrowing bad for their economy? Which 3 groups were expelled by the Spanish Crown? What was the Edict of Nantes? “Repudiating the debt” is like declaring bankruptcy. A nation cannot be liquidated. Instead short- term debts were reorganized as long-term debt, interest suspended, and principle written down.When the Crown repudiated it’s debt, creditors lost assets; some of them went bankrupt; the supply of capital fell off and there were less funds available for commercial. Even without repudiation, the excessive borrowing would have hurt financial markets due to crowding out (See graph). Higher interest rates discourage businesses from borrowing.Groups:JewsMuslim MoorsMoriscosWhat was edict of Nantes:It provided for limited