American Economic History Test 2

Front 1

Give two reasons why the new United States experienced slow economic growth in the 1780s, after the end of the Revolutionary War in 1783.

Back 1

1) The Articles of Confederation proved to be too weak.
2) We lost our main trade partner in England

Front 2

Explain what Walton and Rockoff mean when they write that under the Articles of Confederation, “ . . .any state [could] free ride on the revenues supplied by others.

Back 2

Taxes was left to the state. One state could take advantage of national defense, even if they didn't pay for it. They could pay little to no tax but still benefit from national government, while other states paid.

Front 3

What did I say in class was the most unbelievable event in American History, and why?

Back 3

The ratifying of the Constitution. Amazing to get 13 independent colonies to give up their sovereignty in favor of a central government, in order to form a more perfect union

Front 4

List 4 powers that the new Constitution gave the national government of the United States. Explain why one of them helped the country grow economically.

Back 4

Tax
Issue Money
Make and Enforce Laws
Establish an Army and Navy

National defense allowed us protect trade and against threats that allow us to pursue or own economic goals without hindrance.

Front 5

List one norm, institution, or custom not explicit in the Constitution that helped the United States develop economically. Explain why it helped. From the beginning.

Back 5

Washington established only two term presidency on his own. (New leadership, ideas, no long term aristocracy)

Market based, common language

Front 6

Why was United States economic development driven by external trade before 1815, and increasingly by internal trade after 1815? The North readings may also help you answer this question.

Back 6

We exported and re exported to the warring European countries. Then we established Embargo of 1807 prohibiting this trade. After this, cotton "became King". Created cyclical system in the country. NE financed and shipped, sent goods to the South, the West supplied the South with food, so the country was bound together after the 1807 Embargo.

Front 7

What were the 3 goals Jefferson had in mind when he designed the land policies that guided the settlement of westward lands?

Back 7

1) Get revenue for the government from land sales, not taxes
2) Ensure Individual Property Rights
3) Spread democratic institutions

Front 8

8 major land acquisitions in the United States

Back 8

1) Louisiana 1803
2) Florida 1819
3) Texas 1845
4) Oregon 1846
5) Mexican conquest 1848
6) Gadsden Purchase 1853
7) Alaska 1867
8) Hawaii 1898

Louisiana most important, let US immediately expand west and gave US the Mississippi River and New Orleans.

Front 9

Walton and Rockoff note that 3 questions had to be answered concerning the development of western lands. What are those three questions? How did the United States answer each of them? Did any of the answers change over time?

Back 9

1) How were land holdings and sales to be administered?
2) Should land be expensive, or cheap?
3) What would be political relationship between the new areas and the old ones?

At first you had to buy at least 640 acres. Expensive at first, then became cheaper. Area would become a state at certain population with complete equality in the union. Over time, buying and attaining land became easier (Homestead Act)

Front 10

Difference between "Conservative" and "Liberal" approach to land development. Give one reason why some advocated each approach.

Back 10

Liberal: Land should be sold cheaply and on credit, to allow more people to buy land

Conservative: High price, in order to raise money for the government

Front 11

Briefly explain the theoretical economic chain of causation that describes how improving transportation will lead to a higher standard of living.

Back 11

Transportation makes the MARKET LARGER, and then there can be MORE SPECIALIZATION, which leads to HIGHER PER CAPITA INCOME, and thus, HAPPINESS

Front 12

What are the 5 kinds of transportation that were important in Antebellum America?

Back 12

Canals
Ocean Transport
Roads
Railroads
Steamboats

Front 13

What were the three natural gateways that linked the East with the West before Civil War? Provide one specific historical fact about each of these.

Back 13

1) Northern Gateway (It connected the Great Lakes to New York) Transported over water
2) Northeastern Gateway (Ohio River/Pittsburgh to the East coast. Used roads, canals, railroads
3) Southern gateway (Utilized steamboats on the Mississippi River down to New Orleans

Front 14

What are the main two reasons why the Federal government did not engage in significant infrastructure improvements in the antebellum era? What government institution more commonly made infrastructure improvements in this period?

Back 14

1) The idea of "strict constructionism" didn't give them the right.
2) Fear that any particular project would favor one region over another

These improvements most commonly done by state institutions (NY Erie Canal) and to a lesser extent private and local groups.

Front 15

Compare and contrast the New York and Pennsylvania infrastructure improvement programs. Provide at least two similarities and two differences.

Back 15

Similar: Both used canals, both instituted by state legislature, increase trade with the interior

Different: The PA used roads and railroads more, and PA was much harder to develop because of geography

Front 16

What was The Ball Line of New York, and why was it important.

Back 16

It was ocean transportation to England on a regular basis in 1818. It also allowed commerce between New York and England by reducing risk and uncertainty in overseas commerce. It was consistent.

Front 17

What was probably the most important technological improvement in antebellum transportation, at least based on declines in freight rates? Why was this decline so dramatic?

Back 17

Steam Power.
It allowed gains in productivity in moving people and freight, and increased competitive market which drove down costs and enabled more expansion.

Front 18

Explain the home goods map, and the effect that transportation had on it.

Back 18

It shows the decline of household wool. Advances in transportation allow specialization and a more productive economy. The people aren't needing to make their own stuff anymore, which was inefficient.

Front 19

Three characteristics of the Factory System

Back 19

S ubstantial Output of a Standardized product

A ssembly of organized workers

C omplex operations, with mechanization

Front 20

1) Machines and technology
2) Standardized interchangeable parts
3) Continuous process and assembly lines
4) Power and Energy
5) Adapting technology to overcome factor scarcity ("ingenious labor machines")

Power: Water Wheel
Energy: Coal
Assembly Line: Flour Mill

Back 20

5 Prerequisites for Factory System, give three examples

Front 21

List 4 leading manufacturing industries in the United States in 1860.

Back 21

Cotton
Lumber
Boots
Flour

Front 22

Explain why W&R argue that it was “ . . .the Americans who built the ingenious machines, not the British?” in the antebellum period.

Back 22

Our skilled labor was in short supply, even more so than our capital. So we NEEDED to build labor saving, automated machines to overcome our labor shortage and compete. Economics!

Front 23

What kind of monetary system did the United States establish at the start of the Country in 1789?

Back 23

Base 10 monetary system based on gold and silver

Front 24

Which three people do W&R credit with establishing a base-10 monetary system? Tell me two biographical details about Robert Morris (which you might need to look up on-line)

Back 24

1) Jefferson
2) Hamilton
3) Morris

He signed the Declaration, the Articles, and the Constitution. He went bankrupt and spent time in debtors prison.

Front 25

What is Gresham's Law? How applicable to bi metallic system? To college classes? And one advantage of a bi metallic system?

Back 25

It says that with two currencies, bad money could drive out the good money, that which is overvalued will drive out the undervalued.

If two classes are worth the same credit and one is an easy A, it could drive out the better teacher who doesn't give easy A's.

Bi metallic system is good because if one metal becomes scarce, you still have the other to keep the money supply going.

Front 26

Discuss the debate between Jefferson and Hamilton regarding the First Bank of the United States. Give three reasons why one favored it and three reasons why the other opposed it.

Back 26

Hamilton favored: 1) Banks could lend money to govt. 2) Build relationship with private business. 3) Could collect tax

Jefferson opposed: 1) Unconstitutional 2) Would create a "money monopoly" 3) Would benefit North more than South

Front 27

Who's Nicholas Biddle, and what 3 policies did he use to guide the 2nd Bank?

Back 27

He was the “aristocratic” president of the second bank of the United States. 1) Made bank the lender of last resort 2) Lend to businesses when other banks wouldn’t 3) Issued uniform currency for entire country

Front 28

Who opposed and killed the 2nd Bank? What are his 4 reasons?

Back 28

Andrew Jackson

1) Unconstitutional
2) Too much foreign ownership
3) Too much ownership in the East
4) Benefited the rich more than poor

Front 29

What are the five periods of depression in US History?

Back 29

Great Depression 1839-1849
1870s
1890s
1930s (Great Depression)
Great Recession (2008-

Front 30

Name at least two economic consequences of the Gold Rush of 1849

Back 30

1) Economic boom in the US (GDP goes up)
2) Increase in prices (Inflation)
3) Helps develop California

Front 31

What does Wray say the historical record shows actually solved the problem of barter. What key piece of evidence does he cite that early coins could not have been used for daily transaction?

Back 31

It was created to pay of government debt (tax). "Debts preceded money, not the other way around". This is seen in Mesopotamia. He says money created to lay claim (tax) to resources. To build a labor supply and mercenary soldiers.

Early coins were too valuable to be used in daily commerce, thus being an inefficient medium of exchange.

TWINTOPT

Front 32

According to Wray, how does the government establish the institution of money and why does it do this? Cite one piece of historical evidence Wray notes supports this hypothesis.

Back 32

The government issues debt to the people (tax) and issues money to the laborers and soldiers to pay off this tax. He says in the colonies, governors "create a labor supply willing to work for money wages by imposing taxes".

TAXES DRIVES MONEY
TWINTOPT

Colonial Africa does this. "demanding taxes to be paid in government issued currency was to compel Africans to offer their labor power.

Front 33

Why is money created in Neoclassical Economics? What does Wray say?

Back 33

To solve the problem of barter, and "double coincidence of wants". (Econ Teacher/Food). In this we believe in money, because we have "faith"it has value

Wray says the government taxes the people in order to create a labor supply and issues money for them to have a standard way of paying these taxes.

Front 34

Why, according to Wray did both the U.S. Continental money under the Articles of Confederation, and the Confederate money during the Civil War, lose so much value?

Back 34

In both the paper money being issued was always greatly in excess of tax liabilities that could be imposed by the government. Inflation ensued, currency devalued.

Continental congress didn't have power to tax (states), and the South was never truly able to impose and enforce taxes. South's currency rose 28x and North's inflated only 2x.

Front 35

What does it mean to say the United States followed the doctrine of fiscal prudence in the 19th and early 20th centuries, and what does Wray argue was the consequence of this?

Back 35

He states that except during periods of war the US Govt “adopted fiscal prudence”, we would run large debts during war, and then try to run fiscal surpluses after the war. He says that this led to contraction through a decline in the money supply, banking system problems, and caused recessions and depressions that brought back the debt.

Front 36

What is North’s antebellum interregional growth hypothesis? Provide at least 4 characteristics of this.

Back 36

We were divided into regions, and cotton as "king" brought us together through our specialization. The NE financed, transported, shipped, marketed southern Cotton, and supplied the South with manufactured goods. The West provided foodstuffs to the South and the West was also a market for the NE. The regions became intertwined through this, and movement of people west became a major idea.

"Income directly or indirectly from cotton was the major independent influence on the evolving pattern of interregional trade"

Front 37

Why did American economic growth accelerate after 1793? List one manifestation of this growth described in North. What policy brought this rapid growth to a close in 1807?

Back 37

In 1793 there were European wars beginning, and in 1807 is with the Embargo of trade to Britain and France (46). “Between 1793 and 1808 the economic development of the United States was tied to the international trade and shipping” especially providing exports to the warring countries and the re export of goods to them because they didn’t want to trade with each other (46). One manifestation of this growth is the development of the Northeast, where much wealth was accumulating.

Front 38

Draw the supply curve for cotton given by North on page 72 of his reading. Be sure to properly label your axes. Explain the two distinct regions of this supply curve and how they reflect the historical realities of cotton supply.

Back 38

The price of cotton is on the y-axis. The supply of cotton is on the X-axis. The supply of cotton is increasing steadily and the price is barely rising. Then at a certain supply point the price goes up dramatically. During this first period it is elastic and then when dramatically goes up it is inelastic. “When the growth of demand for cotton finally brought all this potential capacity (land) into production, a further increase in demand resulted in substantial price increases as the supply curve became inelastic.

Front 39

Why do the port cities of New York, Boston, Philadelphia and Baltimore develop more rapidly than the southern port city of Charleston?

Back 39

The Northeast were major shipping ports which tend to urbanize more rapidly. Charleston was the major cotton port, but we were shipping much of that to the NE where the large scale shipping was happening. Also, "the income and social structure of a slave economy, simply did not induce urbanization" (52).

Front 40

Why does Adam Smith particularly, and neoclassical economics generally, argue that free labor will be more profitable than slave labor? Be sure to list two reasons Smith gives and two reasons we discussed in class.

Back 40

Smith

1) Slaves bad workers (not motivated)
2) In the end, freemen will be cheaper than slaves

Class

1) Slaves had different cultures/languages (train)
2) Slaves had incentive to run away
3) Restricted specialization (forced into menial task)

Front 41

What two reasons does Mann give for why Great Britain because of historical experience would not have been expected to promote slavery.

Back 41

1) British had been enslaved by Pirates
2) Freedom as their birthright, loathed the Pagans (Muslims) and Papists (Spanish)

They were proud to be different, and they already had mobs of unemployed anyways.

Front 42

Explain how, ironically, the open American spaces so often associated with freedom may have actually encouraged slavery.

Back 42

Adam Smith claimed that laborers would see available land around them and leave for it, to become landlords themselves. They’d then hire workers who would eventually do the same. So, in America, our wide-open frontier might have "ironically" led landowners to restrict the freedom of movement to the cheap, available land through slavery. Unintended consequences?

Front 43

What is Mann’s central thesis regarding why slavery develops in North American below Washington D.C., and South America above Uruguay and Paraguay?

Back 43

Malaria more common South of Washington and North of Uruguay because of the temperature.

W. Aricans largely immune to malaria. A large labor force insured against disaster, and this economy of scale incentivized more slavery, more demand for them.

Essentially, where malaria thrived you see slavery, and the opposite where it didn't.

Front 44

Describe briefly the Scottish colonization experience in Panama. (3 details) Why is it important to Mann’s hypothesis?

Back 44

1) 25-50% of all Scottish investment is in Panama
2) 75%+ die, mostly to malaria
3) They were well supplied, had good water, few problems with natives.

Central to the hypothesis because shows that European labor cannot thrive here! They die, and further proof that European labor not good enough.

Front 45

Briefly Compare and contrast slavery in Africa and Europe with slavery in America by providing two features that were similar and two that were different.

Back 45

Similar:
1) Slaves used for labor against their will
2) African slaves used in both

Different
1) Americans use chattel slavery
2) In Europe/Africa sometimes slaves given non menial tasks