Department of Economics Fall 2002University of California Economics 113Berkeley Professor OlneyECONOMICS 113: FINAL EXAMINATIONPART I. QUESTIONS FROM LAST THIRD OF COURSE (60 points possible; 60 minutes)A. Paired Identification (24 points total; 24 minutes total)Choose two of the following three pairs of items. Define or identify each term in the pair (6 points). Then, brieflydiscuss the connection between the two terms (6 points). Each answer is worth 12 points total. You should spendno more than 12 minutes on each question.(1) (12 points; 12 minutes) (a) Changes in women’s labor force participation rate, 1970 - 2000, and(b) Changes in fertility rate, 1970 - 2000(2) (12 points; 12 minutes) (a) Pattern of educational attainment by race and ethnicity, 1980 - 2000, and(b) Earnings of Mexican immigrants relative to native born whites, 1980 - 2000(3) (12 points; 12 minutes) (a) Effect of 1970s OPEC oil embargo on prices, and (b) Changes in productivity growth rate, 1970 - 1990B. Using Economic Models and Concepts to Explain Historical Events (24 points total; 24 minutestotal) Answer two of the following three questions. Allocate no more than 12 minutes to each question.(1) (12 points; 12 minutes) Use the concept ofcomparative advantage and the pattern ofchange in educational attainment to explainthe post-1980 changes in marriage patterns.(2) (12 points; 12 minutes) Use the concept of theold age dependency ratio and late 20th centurydemographic trends to explain why RonaldLee & Jonathan Skinner predict that SocialSecurity tax rates will increase in the 21stcentury.(3) (12 points; 12 minutes) Use the regressionresults reported in the table below to explainwhy Rowthorn and Ramaswamy concludethat, in general, internal factors explain mostof deindustrialization.Determinants of Manufacturing’s Shareof Total Employment(t-stats in parentheses)Log Y 11.65(10.92)(Log Y)2-0.643(11.01)Exports - Imports 0.015(4.16)Imports from LDCs -0.041(1.57)Investment / GDP 0.014(4.26)R20.91Turning Point $8,673-300-200-1000100200300(billions of dollars)-15.0-10.0-5.00.05.010.015.0(percent)1970 1980 1990 2000Federal Government Deficit & Surplus1971-2003Nominal DeficitDeficit / GDPSource: Economic Report of the President 2002, Tables B1, B3, B81.Source: Gordon, Journal of Economic Perspectives (Fall 2000).C. Graph and Table Interpretation (12 pointstotal; 12 minutes total) Answer bothquestions.(1) (6 points; 6 minutes) What is the graphsaying? What is the implication of the graphfor the post-1990 pattern of economicgrowth?(2) (6 points; 6 minutes) What is the figuresaying? According to Bob Gordon, what is theimplication of the figure for futureimprovement in productivity growth?PART II. QUESTIONS FROM ENTIRE COURSE (100 points possible; 100 minutes total)A. Paired Identification (24 points total; 24 minutes total)Choose two of the following three pairs of items. Define or identify each term in the pair (6 points). Then, brieflydiscuss the connection between the two terms (6 points). Each answer is worth 12 points total. You should spendno more than 12 minutes on each question.(1) (12 points; 12 minutes) (a) Earnings gaps between immigrant & native born workers, and(b) earnings gaps between male & female workers(2) (12 points; 12 minutes) (a) educational attainment, and (b) the share of manufacturing in total employment(3) (12 points; 12 minutes) (a) labor productivity growth in agriculture in the late 19th century, and(b) labor productivity growth in manufacturing in the late 20th century.B. Using Economic Models and Concepts to Explain Historical Events (36 points total; 36 minutestotal) Answer three of the following four questions. Allocate no more than 12 minutes to each question.(1) (12 points; 12 minutes) Use the concept of asymmetric information to discuss how insider relations inantebellum banking and the banking crises of the 1930s each affected investment spending.(2) (12 points; 12 minutes) Why is econometrics used to demonstrate relationships in economic history? Illustrate your answer with any one example from the semester.(3) (12 points, 12 minutes) Use the concept of profit maximization to discuss similarities between the institutionof slavery and marriage bars.(4) (12 points; 12 minutes) Discuss how then-current economic thought regarding the determinants ofunemployment affected federal government policy during the 1930s Franklin Roosevelt Administration, andduring the 1980s Ronald Reagan Administration.C. Essay Question from Whole Course (40 points; 40 minutes)We have woven together three strands of U.S. economic history in Economics 113: economic growth, developmentof infrastructure, and inequities in economic treatment. Sometimes these three strands came together in one tale. For example, in the discussion of agricultural change, we discussed the role of increased land and land productivityin contributing to economic growth, the financial and governmental institutions that enabled increases in landownership, and the removal of Native Americans from the land. We also discussed inequities in the context ofslavery, discrimination, and distribution of income and wealth. Economic historians — and hopefully now you, too— believe that studying history can provide new perspectives on recent economic patterns and on the potential forfurther economic growth and development in the 21st century.You will write an essay that uses examples from economic history to illustrate factors which contribute to increasesin living standards, and the costs borne by some individuals or groups as the rest of the economy experiences risingliving standards. Your essay will conclude with a look toward the future: what lessons do we learn from history aswe assess the potential for growth in the American economy in the 21st century?Your essay should include these three sections: • First, set the stage. What is the aggregate production function that can be used to discuss issues of growth incontemporary and historical contexts? What are the factors that determine changes in output per capita (Y/P)? Highlight the theoretical sources of growth. Discuss the role for development of infrastructure. • Second, illustrate the three strands of economic history (growth, infrastructure, inequities). Choose threeexamples — one illustrating growth, one illustrating development, one illustrating inequity — with one examplefrom each of three time periods: pre-1860, 1860-1940, and