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Previous Finals, Midterms and Problem Sets
for Economics 115

The World Economy in the 20th Century


Below is a list of previous finals, midterms and problem sets for Econ 115 courses taught by Professor Eichengreen. These items are intended as study aids. Be careful not to confuse them with current problem sets which are due this semester. To view any of the items, either click on the item that interests you or scroll down to browse.

    First Midterm, Fall 2000
    Second Midterm, Fall 2000
    Problem Set, 2000
    Final Exam, Fall 2000
    First Problem Set, Fall 1999
    First Midterm, Fall 1999
    Second Midterm, Fall 1999
    Final Exam, Fall 1999
    First Midterm, Fall 1998
    Second Midterm, Fall 1998
    Final Exam, Fall 1998
    Problem Set #1, Fall 1998
    Problem Set #2, Fall 1998
    Second Midterm, Fall 1994
    Make-up Midterm, Fall 1994
    Final Exam, Fall 1994
    Problem Set #1, Fall 1993
    Problem Set #2, Fall 1993
    First Midterm, Fall 1993
    Second Midterm, Fall 1993


Department of Economics
University of California, Berkeley
Economics 115 -%nbsp;The World Economy in the 20th Century

FIRST MIDTERM = FALL 2000

1. Identify each of the following concepts and explain its relevance to the modern world economy. (10 points each)

A. European Coal and Steel Community

B. National Industrial Recovery Act

C. International Bank for Reconstruction and Development

D. Fundamental Disequilibrium

E. White Plan

2. Answer both of the following two essay questions. (25 points each).

A. The lessons that government officials and others drew from the Great Depression of the 1930s shaped the policies pursued after World War II and guided efforts to reform and strengthen the international monetary and financial system. Exactly what lessons did policy makers in the U.S. and Europe draw from the Great Depression? To what specific changes in policies and institutions did those lessons lead after 1944?

B. Between 1948 and 1973, economic growth was faster in both Western Europe and Japan than in any other period of comparable (or greater) length covered in this course. Did some of the same factors contribute to rapid growth in both Europe and Japan? What were these factors conducive to growth that the two economies had in common? (Be sure not to simply list sundry and assorted factors contributing to growth in these two cases but to focus on factors that the two economies had in common.)


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND MIDTERM - FALL 2000

1. Identify each of the following concepts and explain its relevance to the modern world economy. (10 points each)

A. Treuhand

B. IMF conditionality

C. Keiretsu

D. Fiscal federalism

E. Delors Report

2. Answer two out of the three following essay questions. (25 points each)

A. American economists are skeptical of the efficacy of Europe's monetary union. They observe that Europe lacks a number of key conditions that make the U.S. monetary union operate smoothly. What are these key differences between the U.S. and European economies? Have the warnings of EMU's critics been borne out in the first 24 months of Europe's new currency?

B. In the early 1990's, a number of politicians and economists called for a "new Marshall Plan" for Eastern Europe and the former Soviet Union. How, if at all, would a Marshall Plan for these transition economies have helped them to dismantle central planning and develop functioning market economies? Given your knowledge of the original Marshall Plan, analyze the likely effects of a new Marshall Plan for Eastern Europe and the former Soviet Union in, say, 1991. Be sure to describe the details of the original Marshall Plan, and to explain how it worked.

C. Many observers have argued that the economic and financial crisis that hit East Asia in summer of 1997 differed from the financial crises that came before. Given your knowledge of earlier financial crises (in the Great Depression of teh 1930s, in Europe in 1992, in other times and places), what aspects of the recent Asian crisis look unique? In what respect is it similar, and in what respects different, from the crises that preceded it?


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FINAL EXAM - FALL 2000

Part I. Short Identifications. Identify the following and explain its relevance to the modern world economy. (10 points each)

A. Bancor

B. Werner Report

C. Universal Banking

D. Increasing returns to scale

E. General Agreement on Tariffs and Trade

Part II. Essay Questions. Answer two of the following three essay questions. Do not answer all three. Be sure to address each portion of the questions you select. (30 points each)

A. Imagine that you are the economic advisor to the Governor of California, who is considering whether to establish a separate state currency (the California "golden bear") whose exchange rate could vary against the dollar of the other 49 states. Write a memo to the Governor laying out the costs and benefits of the policy and making a recommendation. What are the implications of your analysis for the European Union's monetary unification project?

B. Aggregate economic growth can be decomposed into the contributions of factor accumulation (labor and capital, including human capital) and technological change. In their first two decades of rapid postwar growth, the relative importance of these contributions varied greatly across economies:

Share Accounted for By

Factor Accumulation Technological Change
United States (1953-73) 2/3 1/3
Western Europe (1953-73) 1/3 2/4
Japan (1955-75) 1/2 1/2
South Korea and Taiwan (1960-80) 9/10 1/10
How are we to understand these differences? What are their implications for the growth of these economies after the periods indicated?

C. In 1947 the United States refused to ratify the Charter of the International Trade Organization. The GATT was established in its stead. Now the Uruguay Round of GATT netotiations proposes to create a World Trade Organization. Contrast the structure and operation of these three insitutions. Describe the strengths and weaknesses of the GATT which has provided the structure of trade negotiations since World War II and the role it has played in the postwar period of raipd growth. Why is the GATT now to ge replaced by the WTO? What are the lessons of experience with the ITO and GATT for the WTO?


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FIRST PROBLEM SET - FALL 1999

1. Identify each of the following concepts in a few words and explain its relevance to the modern world economy (10 points each).

A. Modern economic growth

B. Technology transfer

C. Foreign Direct Investment

D. German reparations

E. Hyperinflation

2. Answer both of the following essay questions in 500 words of less (25 points each).

A. According to many observers of today's world economy, the globalization we are currently experiencing is nothing more than "deja vu all over again." In their view, we have seen it all before, specifically in the late 19th century, when national markets were every bit as intergrated internationally as today. Do you agree of disagree? Be sure to distinguish different dimensions of international integration (the integration of labor markets, capital markets, product markets, etc.). If you conclude that there are important differences between the two periods, be sure to both describe them and account for them. If you conclude in favor of similarities between the two periods, again be sure to provide an explanation of the extent of those similarities.

B. In recent years, a growing number of developing countries have moved from pegged to flexible exchange rates, and many of those contiuning to cling to pegged reates have suffered devastating crises. Clearly, one of the most difficult challenges facing policy makers today is to hold exchange rates stable in an environment characterized by high international captial mobility. Yet exchange rates were successfully stabilized, by a wide variety of countries for substantial periods of time, under the pre-1913 gold standard, and this despite the fact that this earlier period was also characterized by hight international capital mobility. What explains the difference?


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FIRST MIDTERM EXAM - FALL 1999

1. Identify each of the five following concepts and explain their relevance to the modern world economy. (10 points each)

A. Price specie-flow mechanism

B. German reparations

C. Aggregate production function

D. Debt deflation

E. Competitive devaluation

2. Answer both of the following two essay questions. (25 points each)

A. There are striking parallels between the Wall Street boom of the 1920s and the Wall Street boom of the 1990s. What in your view are the most important similarities between the two episodes in the economic, technological and policy context? What are the most important differences? What light if any does the historical comparison imply for the future prospects of the U.S. stock market? What guidance if any does the historical precedent provide for the approach the Federal Reserve Board should take today toward the "problem" of the high stock market?

B. Many historians see the Marshall Plan as highly successful in promoting Europe’s economic stabilization and recovery from World War II. In contrast, Western assistance for Russia following the collapse of the Soviet Union has been less successful in achieving the desired economic results. Why did the Marshall Plan succeed? Be sure to distinguish the different channels through which it operated, and provide an assessment of their importance. Why has it not proven possible to replicate the favorable results of the Marshall Plan in Russia in the 1990s?


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND MIDTERM EXAM - FALL 1999

1. Identify each of the following five concepts and explain their relevance to the modern world economy. (10 points each)

A. World Bank

B. Heavy and Chemical Industry Drive

C. Ministry of International Trade and Industry (MITI)

D. Unemployment insurance replacement rate

E. Optimum Currency Area

2. Answer both of the following two essay questions. (25 points each)

A. The decades following World War II were marked by unusually rapid economic growth in Western Europe, the United States, Japan, and newly-industrializing East Asia. Factor inputs and technological change both contributed to this growth, but their contributions were not the same in all four parts of the world. Describe the relative importance of factor inputs and technological change in Europe, the U.S., Japan and East Asia. Be sure to describe the economic model you utilize to reach these conclusions. Then go on to describe the policies and historical circumstances that account for the differing contributions of factor inputs and technological change in these four cases. (Be sure to discuss all four cases.)

B. For more than 25 years, the Bretton Woods System produced two results that have generally eluded policy makers for the rest of the 20th century: exchange rate stability (in other words, a minimum of currency volatility) and financial stability (in other words, a minimum of crises). What were the policies and institutions that delivered these happy outcomes? And if they worked so well up through the end of the 1960s, why did they stop working subsequently?


Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FINAL EXAM - FALL 1999

1. Identify each of the following concepts and explain its relevance to the modern world economy. (5 points each)

A. Export promotion

B. Maastricht Treaty

C. Taut planning

D. IMF conditionality

E. Treuhand

F. Capital account liberalization

G. Dependency ratio

H. Township and Village Enterprise

2. Answer three of the following four essay questions. (20 points each)

A. High unemployment has been a chronic problem for Europe in two decades: the 1930s and the 1990s. Sketch the dimensions of the unemployment problem in the two periods (how high was the unemployment rate?). What were the causes of the unemployment problem in each period, and how did those causes differ? What brought the problem of high unemployment in the 1930s to an end? Are there any lessons from that experience for policy makers who wish to bring down high unemployment in Europe today?

B. The two most serious collapses of industrial production in a Western country in the 20th century were in the United States after 1929 and the former German Democratic Republic (East Germany) after 1989. What were the causes of the collapse of industrial output in each case? What in particular was the role of economic policy? In both cases, would different policies have averted the depth and duration of the collapse? Be sure to be specific about the policies you are describing.

C. Small economies faced by large international capital markets have an exchange-rate dilemma: pegging the exchange rate can be impossibly difficult, but floating the exchange rate can be intolerably painful. Describe the solution to this problem arrived at by 11 members of the European Union. What were the specific economic, political and historical circumstances that made this solution possible? Will the same solution be feasible in Asia? In other parts of the world? Be sure to explain why or why not. And if your answer is "no," then what other solution to this problem will the countries in each region gravitate toward?

D. China and Russia have taken very different approaches to reforming their centrally-planned economies. China’s has been much more successful (so far) in that it has not precipitated a major output collapse. Describe the differences in the reform strategies pursued by the two governments to date and the results of the two approaches. Were there important differences in the conditions prevailing in the two countries when these approaches to the problem were adopted? Could the Chinese approach have been successfully implemented in Russia? How will economic policies have to be adapted in both countries to get or keep reform "on track" in the future?



Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FIRST MIDTERM - Fall 1998

Part 1. Identify EACH of the following concepts briefly and explain its relevance to the modern world economy. (10 points each)

A. Economic history

B. "Rules of the game"

C. Hyperinflation

D. Smoot-Hawley Tariff

E. Marshall Plan

Part 2. Answer TWO out of the following three essay questions in 250 words or less. (25 points each)

A. The operation of the classical gold standard was severely disrupted by the outbreak of World War I. Moreover, it proved impossible to successfully reconstruct that system following the conclusion of hostilities. But the gold standard presumable would not have lasted forever even in the absence of the war. Assume that World War I had not occurred. How long, then, would the gold standard have survived, and why?

B. Politicians responded to the international economic disruptions of World War I and World War II in very different ways. This is evident in the kind of international economic institutions they sought to reconstruct. Characterize and account for the major differences in the kind of actions they took.

C. The question everyone asks about the Great Depression is "can it happen again?" Describe the critical factors that transformed the 1929 recession into the greatest depression the world has yet seen. Can it happen again? If so, why? If not, why not?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND MIDTERM - Fall 1998

Part 1. Answer each of the following multiple choice questions. Each question has only and only one correct answer -- do not check multiple boxes. (8 points each)

1. Europe sought to stabilize its exchange rates in the 1980s by operating:
    a. The European Payments Union
    b. The European Monetary System
    c. The European Monetary Union

2. The typical economic development strategy pursued by industrializing countries in the 1950s was:
    a. Financial liberalization
    b. Import substitution
    c. Export promotion

3. The Bretton Woods System departed from the gold standard that preceded it by:
    a. Abolishing the monetary role of gold
    b. Eliminating all provision for exchange rate changes
    c. Authorizing countries to restrict international capital flows

4. Unemployment in Europe has:
    a. Has risen since the 1970s
    b. Fallen since the 1970s
    c. Remained roughly unchanged since the 1980s

5. The Maastricht Treaty:
    a. Was an agreement to establish the European Economic Community
    b. Was an agreement to establish the European Monetary System
    c. Was an agreement to establish the European Monetary Union

6. Capital account convertiblity entails:
    a. Removing all prohibitions on international transactions
    b. Removing all prohibitions on international financial transactions
    c. Removing all prohibitions on trade-related transactions

Part 2. Answer two of the following three essay questions in 250 words or less. (26 points each)

A. In retrospect, the Soviet model of central planning was deeply flawed. Yet this model sustained respectable rates of economic growth for decades, until the worsening problems of the 1970s and 1980s. If this system was so deeply flawed, how could it have sustained respectable rates of economic growth for so long?

B. Many economists argue that Europe's monetary union will function less smoothly than that of the United States. What is the basis for their arguement that a single currency may be more suitable to the 50 U.S. states than to the 15 members of the European Union? If this is indeed the case, why then is Europe going ahead with its monetary union anyway?

C. The economic transformation of the former East Germany has been a difficult process. Unemployment in the former East Germany remains high, and labor productivity is still much lower than in unified Germany's west. To what extent can initial conditions (the state of the East German economy circa 1990) on the one hand and subsequent economic policies on the other, account for this experience? Is there another set of policies that would have made for and easier transition to the market? If so, why was this other set of policies not adopted?

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Department of Economics
University of California, Berkeley
Economics115 - The World Economy in the 20th Century

FINAL EXAM - Fall 1998

Part 1. Answer each of the following multiple choice questions. Each questions has one and only one correct answer -- do not check multiple boxes. (3 points each)

1. International trade was liberalized after World War II through negotiations conducted under the auspices of the:
    a. World Trade Organization
    b. International Trade Organization
    c. General Agreement on Tariffs and Trade

2. The tariff imposed by the United States in 1930, which arguably worsened the Great Depression, was the
    a. Fordney-McCumber Tariff
    b. Smoot-Hawley Tariff
    c. Hoover-Mellon Tariff

3. The Soviet system of economic plannin most heavily promoted the development of:
    a. Small-scale agriculture
    b. Heavy industry
    c. Town and village enterprises

4. The share of IMF member countries with pegged exchange rates has:
    a. Risen since the 1970s
    b. Fallen since the 1970s
    c. Remained roughly unchanged since the 1980s

5. Europe's monetary union agreement establishes:
    a. A system of fiscal federalism to offset members' asymmetric shocks
    b. A stability pact to prevent memebers from running excessive deficits
    c. A regulatory agency to contain problems in members' banking systems

6. Japanese economic growth after World War II was heavily dependent on a system of industrial groups known as:
    a. Zaibatsu
    b. Keiretsu
    c. Chaebol

Part 2. Short Identifications (6 points each). Answer each of the following in 100 words or less. Define the term and explain its relevance to the modern world economy.

A. Insider-outsider model

B. Adjustable peg

C. Directed credit

D. Treuhand

E. Contagion

F. Moral hazard

Part 3. Answer three of the following five essay questions, each in 350 words or less. (15 points each)

A. The relative importance of technical change and factor accumulation differed dramatically across countries after World War II. In the United States growth was mainly due to factor accumulation, while in Europe it was mainly due to technical change. In Japan technical change and factor accumulation were of roughly equal importance, while factor accumulation seems to have played the dominant role in the other East Asian countries. How can we understand these very different growth patterns?

B. Critics of the International Monetary Fund argue that it erred in responding to the Asian crisis. What are the errors that the critics have in mind? How, according to the critics, should the IMF's response have differed? What, in your view, would have been the consequences of these different policies?

C. Economic reform in China has not been accompanied by the dramatic contraction of output characteristic of the other so-called "transition economies." What explains China's different experience? Are there lessons from the "Chinese model" that might have been adopted by other transition economies seeking to better manage the process of reform and to move more smoothly to a market economy?

D. Some commentators have argued that a "Marshall Plan" for Eastern Europe and the former Soviet Union, extended by the U.S. and the European Union at the beginning of the 1990s, would have greatly eased the transition economies' shift from plan to market. Would it? How important, in other words, was the actual Marshall Plan in supporting postwar Western European reconstruction, and could that experience have been replicated in Eastern Europe following the end of the Cold War?

E. In the 1990s, China and Russia have followed very different economic reform strategies. Chinese reform has not precipitated an output collapse and macroeconomic crisis like that experienced in Russia. Are there aspects of the Chinese approach to reform that Russian governments would have been wise to emulate? Or are the circumstances so different in the two countries that the Chinese model would not have been feasible in Russia? In formulating your answer, be sure to describe the principal characteristics of reform strategies in the two countries. And be sure to be clear about the time period or periods to which the various parts of your answer refer.

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

PROBLEM SET #1 - Fall 1998

Part 1. Identify each of the following concepts in a few words and explain its relevance to the modernworld economy. (10 points each)

A. Path dependence

B. Aggregate production function

C. Schumpeterian growth

D. Infant industry protection

E. Price specie-flow mechanism

Part 2. Answer each of the following two essay questions in 250 words of less. (25 points each)

A. Economicsts argue that there is a powerful tendency for rates of economic growth and levels of income per capita to converge across countries. Some have gone further and estimated that there is a strong tendency for convergence to proceed at 2 per cent a year. Why do economic historians doubt this "iron law of convergence?"

B. The final decades of the 19th century and the final decades of the 20th century are regularly referred to as "the two eras of globalization." The parallels between the two periods are extensive, to be sure, but there are also important differences between these two eras in the extent, nature and effects of international economic transactions. Describe and account for these differences.

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

PROBLEM SET #2 - Fall 1998

Part 1. Identify each of the following concepts in a few words and explain its relevance to the modern world economy. (10 points each)

A. National Industial Reconvery Act

B. Co-Determination

C. Deliberative Councils

D. MITI (Ministry of Trade and Industry)

E. Export promotion

Part 2. Answer each of the following two essay questions in 250 words of less. (25 points each)

A. The Bretton Woods System of pegged by adjustable exchange rates had much in common with the gold standard of the interwar years. Under both systems, governments pegged the exchange rate. Under both systems, they held international reserves in the form of convertible foreign exchange (dollar depostis in New York, for example). But while the interwar gold standard was unstable, deflationary and - ultimately - disastrous, the Bretton Woods System functioned remarkably well. What accounts for the very different performance of the two systems?

B. Scholars of Asian economic development dispute the role of industrial policy (also known as "industrial targeting") a factor in the rapid economic growth of the Japanese and East Asian economics after World War II. Describe the alternative points of view. Which interpretation is most strongly supported by the evidence?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND MIDTERM - Fall 1994

Part I. Short Identifications. Identify the following and explain their relevance to the modern world economy. Answer FOUR out of the five. Do NOT answer all five.
(15 points each)

1.   Subsidiarity

2.   European Monetary System

3.   Ministry of Industry and Trade (MITI)

4.   International Trade Organization

5.   Technical Assistance

Part II.  Essay Question.  Answer ONE of the following two questions. Do NOT answer both. Be sure to address each portion of the question you select.
(40 points)

1.   Many observers have noted striking parallels between the collapse of the Bretton Woods international monetary system in 1971 and the crises in the European Monetary System in 1992-93. Describe and explain the downfall of both monetary arrangements.  Can it be argued that similar factors led to the downfall of both systems?  If so, what are the implications for the future of international monetary arrangements?

2.   Economists disagree about the contribution to modern economic growth of government policies targeting particular industries.  In the cases of Japan and South Korea, for example, some argue that government favoritism of particular industries was critical to industrial success, while others argue that the economies in question would have grown even faster without this intervention.  What is the intellectual basis and empirical evidence for these arguments?  If you think there is evidence that intervention can be important, be specific about the characteristics of the economies in which it is effective.  Can you relate your observations to Gerschenkron's theory of "relative backwardness?"

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

MAKE UP MIDTERM - Fall 1994

Part I. Short Identifications. Identify the following and explain their relevance to the modern world economy. Answer FOUR out of the five. Do NOT answer all five.
(15 points each)

1.   European Payments Union

2.   Postal Savings System

3.   World Trade Organization

4.    Exchange Rate Mechanism (ERM)

5.    Mutual recognition

Part II.  Essay Question.  Be sure to answer EACH part of the following question.
(40 points)

1.   Policymakers disagree about whether monetary unification is necessary for the success of Europe's Single Market initiative. (The British say no, the French say yes, for exammple.) What is the intellectual basis for each of these opposing positions?  Is there any evidence from the operation of existing economic and monetary unions (the 50 U.S. states, post-1990 Germany) that sheds light on this controversy?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FINAL EXAM - Fall 1994

Part I.  Short Identifications.  Identify the following and explain its relevance to the modern world economy. Answer four of the five.  Do not answer all five.
(10 points each).

1.  European Coal and Steel Community

2.  Fiscal Federalism

3.  Keiretsu enterprises

4.  Increasing returns to scale

5. General Agreement on Tariffs and Trade

Part II.  Essay Questions.  Answer two of the following three questions. Do not answer all three. Be sure to address each portion of the questions you select.
(30 points each.)

1. Imagine that you are the economic advisor to the Governor of California, who is considering whether to establish a separate state currency (the California "golden bear") whose exchange rate could vary against the dollar of the other 49 states. Write a memo to the Governor laying out the costs and benefits of the policy and making a recommendation. What are the implications of your analysis for the European Union's monetary unification project?

2. Aggregate economic growth can be decomposed into the contributions of factor accumulation (labor and capital, including human capital) and technological change. In their first two decades of rapid postwar growth, the relative importance of these contributions varied greatly across economies:

                                                                               Share Accounted for by
                                                          Factor Accumulation               Technological Change
          United States (1953-73)                        2/3                                          1/3
          Western Europe (1953-73)                   1/3                                           2/3
          Japan (1955-75)                                   1/2                                           1/2
          South Korea and Taiwan (1960-80)      9/10                                         1/10

How are we to understand these differences? What are their implications for the growth of these economies after the periods indicated?

3. In 1947 the United States refused to ratify the Charter of the International Trade Organization. The GATT was established in its stead. Now the Uruguay Round of GATT negotiations proposes to create a World Trade Organization. Contrast the structure and operation of these three institutions. Describe the strengths and weaknesses of the GATT which has provided the structure of trade negotiations since World War II and the role it has played in the postwar period of rapid growth. Why is the GATT now to be replaced by the WTO? What are the lessons of experience with the ITO and GATT for the WTO?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FIRST PROBLEM SET - Fall 1993

Part I.  (60 points)

Identify and briefly explain the significance of each of these concepts to the modern world economy. Each item is worth 10 points.  Do NOT write more than one half of a bluebook page or the equivalent on any one concept.

1.   Economies of scale

2.   Zollverein

3.   Industrial Revolution

4.   Infant industry protection

5.   American System of Production

6.   Trade diversion

Part II.  (40 points)

Answer ONE of the following two questions.  Be sure to answer all parts of the question you choose.  Do not write more than three bluebook pages or the equivalent.

1.   Some economists argue that population growth stimulates economic growth, while others conclude that it is a hindrance.  Which view is correct for the 18th and 19th centuries?  Justify your answer with reference to one or more of the national economies we have studied in this course.  Be sure to be specific about the channels through which population and economic growth interact.

2.  Consider the following two quotations. (1) "The process of economic growth exhibits the same broad characteristics

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND PROBLEM SET - Fall 1993

Part I.  Short Identifications.  Identify each of the following concepts and explain its relevance to the modern world economy.  Do NOT write more than one half of a bluebook page or the equivalent on any one item. (10 points each.)

1.   Dawes Plan

2.   National Industrial Recovery Act

3.   International Trade Organization

4.   Monetary and Spending Hypotheses

5.   Corporatism

Part II.  Answer each part of the following problem. (The problem is worth 50 points in total.)

Most economists believe that "inflation is a monetary phenomenon."  If the money supply doubles, the economist's best guess is that the price level doubles.

1.  Use the quantity equation to explain the logic for the "economist's best guess."

2.  During World War I, the German money supply rose by 900 per cent, but the price level rose by only 500 per cent.  How can these two facts be reconciled with one another? What was the role of the gold standard in particular? (Use your answer to Part I of this question in your answer to this part.)

3.  During the last months of the German hyperinflation, prices rose much more quickly than the money supply (the opposite of the relationship that prevailed during World War I.)  What accounts for this contrast?  What aspects of the domestic and international political and economic situation contributed to this outcome?

4.  After Germany's inflation was halted in November 1923, its money supply continued to rise rapidly. Athough the note circulation quadrupled over the course of 1924, prices hardly rose at all! What aspects fo the domestic and international political and economic situation contributed to this outcome?

5.   During 1929-31, prices and money supply in Germany both fell dramatically, yet the government did little about it.  What were the roles of the gold standard and the hyperinflation in explaining these events?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

FIRST MIDTERM - Fall 1993

Part I. Short Identifications. Identify and briefly explain the significance of these concepts to the modern world economy.  Do NOT write more than one bluebook page or the equivalent on any one concept. (10 points each.)

A.  Protoindustrialization.

B.  Vertically integrated enterprise.

C.  Kuznets cycle.

D.  Price specie flow mechanism.

E.  Backward linkages.

F  Universal (or industrial) bank.

Part II.  Essay Question.  Answer ONE of the two questions. Do not answer both. Your answer should not exceed 5 bluebook pages.
(30 points)

A.  Alexander Gerschenkron in his "theory of economic backwardness" seeks to explain how economic growth in "latecomers to industrialization" differs from that of the pioneering industrializers. What are the institutional factors that Gerschenkron emphasizes? Do they successfully explain how latecomers succeed in catching up to early industrializers?  Can they also explain why some early industrializers, like Great Britain, not only lose their lead but eventually fall behind?

B.  The 19th century gold standard is a widely cited example of a smoothly operating international monetary system.  Some economists advocate returning to the gold standard as a way of solving current international monetary problems. Explain how the 19th century gold standard worked. Could it be replicated today?  If so, would it provide a means of solving current international monetary problems?

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Department of Economics
University of California, Berkeley
Economics 115 - The World Economy in the 20th Century

SECOND MIDTERM - Fall 1993

Part I. Short Identifications.  Identify and briefly explain the significance of each of these concepts to the modern world economy.  Do NOT write more than one bluebook page or the equivalent on any one concept. (10 points each.)

1.  Kondratieff Cycle.

2.  Gold bloc.

3.  International Bank for Reconstruction and Development.

4.  Import substitution.

5.  Aggregate production function.

Part II.  Essay question.  Answer ONE of the two questions, but not both. Be sure to answer each part of the question you chose.
(50 points total.)

A.  The Marshall Plan is widely hailed for its critical contribution to economic recovery in post-WWII Western Europe.  What were channels through which the Marshall Plan could have aided recovery?  Which were most important in practice?  Which were least important? Document your answer with reference to the experience of specific countries.  Does the post-World War II Marshall Plan contain lessons for those contemplating western aid for Eastern Europe and the former Soviet Union today?

B.  The Great Depression of the 1930s was an international phenomenon--all countries were affected to varying degrees. Yet the Depression began relatively early and was exceptionally severe in the United States.  What were the mechanisms through which the depression in the U.S. infected other parts of the world?  Can differences in the importance of these various mechanisms explain differences in the course and in the severity of the Depression in other countries?  Document your answer with reference to the experience of at least three countries other than the United States.

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