shared via CourseHero com This study resource was https www coursehero com file 9709435 Midterm2 VersionB ECN110B SQ2014 AK VERSION B 1 ECN 110B World Economic History II Spring 2014 MIDTERM EXAMINATION II Suggested Answers NAME UC DAVIS STUDENT ID NUMBER PLEASE READ THE FOLLOWING CAREFULLY INSTRUCTIONS This exam is worth 160 points This exam has a multiple choice section 8 questions for 5 points each for a total of 40 points or 1 4 of the exam grade and a short answer section 4 questions 30 points each for a total of 120 points or 3 4 of the exam grade The multiple choice questions have one correct answer and should be answered both on a scantron sheet and on the exam The short answer questions require some thought but not a lot of writing Please write your answers within the space provided on the exam Plan your time carefully DON T FORGET TO PUT YOUR STUDENT ID NUMBER ON THE SCANTRON SHEET shared via CourseHero com This study resource was https www coursehero com file 9709435 Midterm2 VersionB ECN110B SQ2014 AK VERSION B 2I MULTIPLE CHOICE QUESTIONS 5 Points each for a total of 25 of the grade Give the best response to each of the following questions NOTE Each question has one and only one correct answer 1 The best explanation for the strong economic growth in South Korea between 1960 and 1990 is a an export led boom b investment rose due to government incentives which then led to an export boom c the Marshall Plan d The Bretton Woods system led to stability and raised investment e Borrowing from the US increased which raised investment and rising domestic demand 2 The main reason the gold standard failed in the interwar period 1920 1938 was because a the British Empire had disappeared b economic growth was abnormally high c there were current account deficits in some countries d there was much less credibility and also cooperation amongst nations was lacking e there was excessive reliance on the banking system 3 Which of the following is NOT a key explanation for economic growth between 1960 and 1990 in several East Asian nations e g Korea Taiwan and Singapore when compared to other countries say in Latin America a High human capital b Low dependency ratios c Low inequality d Improved factor productivity or technology e High investment 4 Which would best categorize the way the Bretton Woods system dealt with the trilemma sovereign means independent in this context a Floating exchange rates sovereign monetary policy free capital movement b Fixed exchange rates sovereign monetary policy free capital movement c Fixed exchange rates sovereign monetary policy capital controls d Fixed exchange rates non sovereign monetary policy capital controls e Floating exchange rates sovereign monetary policy and capital controls shared via CourseHero com This study resource was https www coursehero com file 9709435 Midterm2 VersionB ECN110B SQ2014 AK VERSION B 3 5 To eliminate hyperinflation in Germany in 1923 which of the following was not done a Corporate taxes were lowered b Reparations were eased c Exchange rate was pegged d The French occupied the Ruhr valley industrial area e Lower unemployment benefits 6 Which factor below was not a feature of the strong economic growth between 1950 and 1970 in western Europe a Rapid growth in trade b New plant and equipment making workers more productive c Low inflation d Heavy capital inflows from the USA supporting recovery from war via investment in infrastructure e Centralized wage bargaining 7 The Treaty of Versailles which was signed in 1919 helped lead to which of the following outcomes a Closer integration and political cooperation between European nations b Hyperinflation in Germany in 1923 c Low capital flows to Europe from the US d A poorly designed gold standard system after 1925 e The lack of a leading globally oriented country which could run the international economy like Britain had prior to 1914 8 During the 1930s many countries in the world experienced banking crises Which of the following was not associated with a high likelihood of having a banking crisis a an exchange rate peg or adhering to the gold standard b being an agricultural exporter c heavy competition in the banking system d a lack of branch banking e having deposits in foreign countries that were also experiencing banking crises shared via CourseHero com This study resource was https www coursehero com file 9709435 Midterm2 VersionB ECN110B SQ2014 AK VERSION B 4 Section II Short Answer Questions 1 Consider the following figure from the lecture notes regarding the levels of GDP of several nations during the Great Depression Note that each nation s GDP is indexed such that its level in 1929 100 i What is the main message of this figure Explain carefully what is on the y axis what is on the x axis what the time series lines next to the country names in the graph are trying to tell us There are two key points we are looking for here 30 Points Three possible points 1 The depth of the slump depression varied from country to country 2 Recovery usually started quickly when a country abandoned the gold standard Japan was not on the gold standard which explains their relatively mild recession and successive astronomical growth 3 Not all countries abandoned the gold standard immediately This can explain the length of the Great Depression across countries France stayed on gold until 1936 The US until 1933 etc shared via CourseHero com This study resource was https www coursehero com file 9709435 Midterm2 VersionB ECN110B SQ2014 AK VERSION B 5ii Give three economic variables that were affected by going off the gold standard or devaluing the exchange rate during the Depression how they were affected Then state briefly how these changes mattered for recovery from the Depression DO NOT FOCUS ON GDP HERE BUT RATHER OTHER MACROECONOMIC VARIABLES THAT MIGHT CHANGE GDP 30 Points Three variables 1 Exports rose after going off gold This raises GDP since exports are a component of GDP 2 Investment rose since real interest rates fell after abandoning the gold standard 3 Real wages fell after abandoning the gold standard since prices rose while nominal wages were sticky If the definition of macroeconomic variable confused you and it confused a lot of people we were looking for variables which directly change GEDP which is either output or income depending on how one does the accounting Y C I G NX or it equals total income which includes things like wages and the return on capital shared via