Econ U.S. Economic History I: The Founding Eras John Lovett. Exam 3 - Fall Code Name:

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1 Exam 3 - Fall 2015 Code Name: Part 1: (70 points. Answer on this paper. 2.0 pts each unless noted.) 1. (12 points) Match each statement with the likely author or authors. Each row can have 0, 1, or 2 checks. The first four rows have been done for you. Statement Engermann & Sokoloff Acemeglu I am (or we are) economists. I won a Noble prize. blank blank I have 4 syllables in my last name. Rearranged, our names are Sokomann and Engerloff. The key to good property rights is having lots of Europeans in the colony. The key to good property rights is having an early colonial staple that is highly profitable. Colonies that were roughly 1 /3 European and 2 /3 native tended to have the best property rights. The key to good property rights is having good equality in the colony. The main determinant of later success (i.e. having high living standards today) is whether or not a colony was founded by Britain. The main determinant of later success (i.e. having high living standards today) is the geography of the colony. Settlement colonies (of the past) tend to develop into the wealthy nations of today. Colonies (of the past) that had roughly equal mixes of Europeans and natives tend to develop into the wealthy nations of today.

2 2. (9 points) Below, you have a table with the demographic make-up of various colonies. In the column at right, write the name of the category into which that colony falls. Use the colony types given in class. Write; This is not a normal colony type if the colony does not fall into a category we discussed in class. The first one has been done for you. % Native % European % Slave Name of Colony Type 0% 0% 100% This is not a normal colony type. 99.9% 0.1% 0% 97% 3% 0% 1% 9% 90% 10% 85% 5% 55% 0% 45% 73% 2% 25% 2% 3. You just met the income distribution fairy. The income distribution fairy travels back in time with you to Venezuela in Venezuela is about to gain its Independence from Spain and form a new government. The fairy waves her wand and Venezuelan society changes into one with a very equal income distribution. According to the readings and lecture, this will likely cause Venezuela to: a. grow and develop more slowly than otherwise. b. grow and develop at roughly the same growth as before. c. grow and develop faster than otherwise. 4. According to the Engerman and Sokoloff reading, what best explains each colonial region s choice of a labor type (ex. slave, free European, Native American)? a. 1) the ability to use labor year round resulting from the crops which can be grown there, and 2) the prevailing agricultural wage in the mother country (i.e. the colonizing power) b. 1) the demand for labor resulting from the crops which can be grown there, and 2) the available native labor supply. c. 1) the production processes used by natives (i.e. Native Americans) in the area, and 2) the production processes used by the colonizing power. d. the colonizing power s policies regarding: 1) the sale and transfer of land, and 2) the legality of indentured servant contracts 5. Che Bolivar has just been elected president of Puerto Pobre, a low-income country with typical low-income country characteristics. Che campaigned on the promise of helping the poor by taxing the rich & using the revenues to provide income, education, & land for the poor. According to our readings: a. everything about Che s plan is bad for long-run growth. b. Che s plan has many aspects which will likely decrease long-run growth. In some regards, however, Che s plan is pro long-run growth. c. in the long-run, everything about Che s plan is pro-growth.

3 6. (2.5 pts) It s 1790 and two colonies have just gained independence from their European colonizers. Both are about to draft a new government. Alphastan is a society in income and wealth are very unequally distributed. All the land in Alpha is owned by only a few families. In Betanam, however, income and wealth are distributed very equally. Which country will, according to our readings and lecture, have higher long-run growth rate? a. Alphastan b. Betanam c. there is no reason to suspect their long-run growth rates will differ. 7. (2.5 pts) What best explains you answer to the above (# 6) question? a. If only a few have resources, those few will likely be more eager to have legal protection of property rights. b. If only a few have resources, they will likely leave the country after independence. c. If only a few elites have power when the government is created, they will determine the shape of government. These elites will likely adopt a corrupt system designed to promote only their interests. 8. Hermione, an anthropoligist, argues that around the year 1490 the Aztec Empire (in what is now central Mexico) pursued a mercantilist policy. Assuming Hermione is correct, what was the government of the Aztec Empire doing? The Aztec Empire is attempting to: a. cut tax rates (income, sales, etc.) in the Aztec Empire in hopes that this will increase the Aztec Empire s production enough to actually increase tax revenues b. raise tax rates (income, sales, etc.) in the Aztec Empire and use the revenues to temporarily subsidize new, high tech industries in the Aztec Empire c. decrease the Aztec Empire s exports, and increase its imports d. increase the Aztec Empire s exports, and decrease its imports 9. (6 pts) Indicate ( ) which were the major features of the British Navigation Acts according to the text and lecture. You may check none, some, or all. Stipulations that all goods leaving a colony must be shipped through England before being shipped elsewhere. Stipulations that specifically listed colonial goods must be shipped through England before being shipped elsewhere. Stipulating that X% of crews involved in intra-colonial shipping (ex. New York to Philadelphia) had to be English (England and Wales), not colonial. Stipulating that X% of crews involved in trans-atlantic shipping had to be English (England and Wales), not colonial. Disbanding the local (colonial) lower house of the legislature and replacing them with officials appointed by the crown. Stipulations limiting the size of colonial ships. 10. The country of Humesylvania is currently running a trade surplus (i.e. a goods and services trade surplus). Other than the trade of goods and services, there are no other monetary flows between Humesylvania and the rest of the world. What, if anything, will soon happen as a result? a. Prices will rise in Humesylvania. Humesylvania will have an easier time selling her exports. b. Prices will fall in Humesylvania. Humesylvania will have an easier time selling her exports. c. Prices will rise in Humesylvania. Humesylvania will have more trouble selling her exports. d. Prices will fall in Humesylvania. Humesylvania will have more trouble selling her exports.

4 11. The country of Mercantila is currently running a trade surplus (i.e. a goods and services trade surplus). This time there may be other monetary flows between Mercantila and the rest of the world. Can Mercantila s trade surplus be sustained for, say, several decades? If so, how? a. Yes, but only if there are outflows of currency from other sources. Mercantila could, for example, buy lots of foreign financial assets (ex. ownership of foreign companies, foreign debt, land, etc.) b. Yes, but only if the Mercantilian government spends the extra money coming in on projects within Mercantila. c. Yes. Further, no other flows are needed to maintain this trade surplus. d. No 12. Which of the following is true of Britain in the 1750 s and 1760 s? a. Britain generated inflows of money by running trade surpluses. These inflows, however, were used to fund overseas military spending and purchases of foreign assets. b. The British temporarily lost most of her colonies in India. The British government wanted to increases taxes on the other colonies to pay for military expeditions to re-capture India. c. The British government received large payments from France. These payments, consequences of British victories in War, allowed Britain to increase her military force in the colonies. d. Britain faced large and persistent trade deficits. The British government hoped to pass new laws affecting the colonies that would allow it to close these trade deficits. 13. (4 pts) It s 1765 and you are a British customs inspector in Philadelphia, PA. The following ships have just pulled into harbor with goods from Europe. Which ships are legally allowed to be trading in Philadelphia? Check any and all blanks that apply. the Belle Bateau, a ship owned and crewed by people from Dunkirk, France the Dank Bottom, a ship owned and crewed by people from Chatham, England the Brady Bottom, a ship owned and crewed by people from Boston, Massachusetts the Meget Smukke Båd, a ship owned and crewed by people from Copenhagen, Denmark 14. According to our lecture and readings, the classic example of the triangle trade involved: a. shipping Virginia tobacco to England, then shipping this tobacco to the continent (of Europe) for French luxury goods. Finally, the luxury goods were shipped to Virginia. b. shipping English trade goods to the Caribbean for and trading these goods for sugar, then shipping this sugar to New England and trading for rum. Finally, the rum was shipped to England. c. shipping English trade goods to the Caribbean for and trading these goods for sugar, then shipping this sugar to New England and trading for fish. Finally, the fish was shipped to England. d. shipping English trade goods to Africa and trading these goods for slaves, then shipping these slaves to the Caribbean and trading for sugar. Finally, the sugar was shipped to England. 15. Where did the Chesapeake send most of her commodity exports? a. Africa c. Great Britain b. the Caribbean d. Southern Europe e. Asia f. Mexico

5 16. Where did New England send most of her commodity exports? a. Africa c. Great Britain b. the Caribbean d. Southern Europe e. Asia f. Mexico 17. It s A ship, regularly running the Charleston, South Carolina to Bristol, England route, just pulled in. Where are the ship and her crew most likely from? a. Boston, Massachusetts b. Philadelphia, Pennsylvania d. Charleston, South Carolina e. Kingstown, Jamaica g. Bristol, Palin h. Amsterdam, the Netherlands c. Norfolk, Virginia f. Bristol, England i. Brest, France 18. It s A ship, regularly running the New York to Portsmouth, England route, has just pulled in. Where are the ship and her crew most likely from? a. Portsmouth, England b. Amsterdam, the Netherlands c. Brest, France f. Norfolk, Virginia g. Savannah, Georgia h. Kingstown, Jamaica d. Boston, Massachusetts e. New York, NY i. the preposition at the end of the sentence 19. (4 pts) William is a senior customs official in the British Government. He is about to deliver a report on the major commodity exports of the 13 colonies to the King. Unfortunately, Will was out partying the night before and lost all his data. Help him come up with a quick summary. Indicate the top 2 commodity exports of the 13 colonies. Place a 1 for the top commodity export and a 2 for the second. Barrels & Barrel parts Beef & Pork Corn Finished Iron goods Pine Boards Rice & Indigo Tobacco Un-milled wheat Whale Oil In the fall of 2015 we did not cover either of: 1) The French and Indian War, or 2) The cost to the colonies of the Navigation Acts and the American Revolution (Walton & Rockoff s Three Crises and Revolt. The posted study questions on these sections, however, are pretty good.

6 Part 2: Essay, 30 points. Answer 1 of the following questions. 1. Assume that 3 colonies have just won/earned their independence from their European founders. a. Country A has very unequal income distribution. Don t worry too much about how or why income is so poorly distributed in Country A. Instead, concentrate on the effects of this income inequality. In country A, the wealthy class takes power and is forming a government. What type of institutions will these new founders likely choose according to our class? Why? How might these choices of institutions affect the new country s later development? Use a real world example to illustrate this if you can. b. Country B has relatively equal income distribution. What groups will likely be involved in forming a government in Country B? What type of institutions will these new founders likely choose according to our class? Why? How might these choices of institutions affect the new country s later development? Use a real world example to illustrate this if you can. c. Country C has very unequal income distribution. In country C, the impoverished class takes power and is forming a government. What type of institutions will these new founders likely choose according to our class? Why? How might these choices of institutions affect the new country s later development? Use a real world example to illustrate this if you can. 2. a. Draw a graphical plot or model showing the different population situations a colony can have. b. Label the colony types on your graph (from a) using names from Phillip Curtin and our lecture notes. In class, we had names for colony types. Give a brief explanation of each colony type (ex. two or three sentences per colony type), c. Explain why, according to Engermann and Sokoloff, different colony s ended up with different population mixes? You need to address the 3 main categories of potential labor in the colonies. You do not need a graph to explain this section. A written explanation of what factors caused different colonies to have different population mixes will suffice. Fit Engermann and Sokoloff s population outcomes to the graph and labels you ve already done. Don t worry about how each colony will develop according to Engermann & Sokoloff. Just worry about the population (ethnicity) characteristics. 6