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Midterm Exam 2 – Practice with Answers

Economics 111A Economic History Midterm Exam 2 In general, the highest grades will be given to clear and precise answers. Use your time wisely, and good luck. You will be given one hour and twenty minutes to complete the exam. 1. Land acquisition in the U. S. was incredibly important for the extensive economic growth of the country in the 19th century. a. Why did the US want the territory gained from the Louisiana Purchase? What was the controversy regarding the purchase? (6 points) They wanted transit rights to New Orleans so that they could access their western territory using the Mississippi and Missouri Rivers.

Monroe spent $15 million on the whole territory instead of $2 million on transit rights without Congressional Approval. b. What events ultimately led to the Mexican Cession? Why do we believe the US was able to win the land from the Mexican government? (6 points) The Mexican War or Manifest Destiny The Mexican people had won independence from Spain was left with a government that was fractured and volatile Settlement was a political agenda not inspired by individual families. c. Does Easterlin believe that U. S. land acquisition was a release valve for the Malthusian Trap? What is his reasoning? 6 points) No Population growth rates fell once there was no more land to be settled. We didn’t have famine and disease killing people off once we settled all Western Territory and there was no additional land. 2. Once the 1. 2 billion acres were acquired there was a debate and a process by which the land was distributed. Please define the “Federalists” and the “Anti-Federalists” point of view regarding land policy. What did each side believe could be gained from the type of land policy that they advocated? (8 points) d. Federalists Hamilton Sell land for full value (or high prices and big lots)

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Strengthen Federal Government by adding to the public treasury Discourage settlement because need to encourage manufacturing Good for current landowners e. Anti-Federalists Jefferson Small lots sold on credit for low prices or given away National of small handed farmers promotes democracy Right to labor the earth 3. What was the Homestead Act? What is one argument presented in lecture and discussion in favor of the Homestead Act and one argument presented in lecture and discussion against the Homestead Act? (9 points) f. Definition 160 acres free if you lived on it for 5 years or after 6 months paid $1. 5 per acre g. For Fogel and Rutner show that because of the increase in the marginal product of western labor as a result of settling western territory there is an increase in national income and wages in both east and west. h. Against It moved people west that should have stayed east given that the cost of farming was misrepresented 4. Canals and Steamboats were important innovations that led to a reduction in transportation costs in the pre-Civil War era. i. Why are reductions in transportation costs important for economic growth? (describe in detail) (6 points) Transportation Costs define land values

Transportation Costs define areas of commercial and subsistence farming. Land Values City A B Distance from City j. What was the Erie Canal? Name and explain four overall contributions of the Erie Canal and the Canal Period (these could be contributions to economic growth or contributions to future transportation projects). (15 points) Definition: The canal linking New York Harbor and the Midwest i. Proved that canals were technologically feasible ii. Proved that canals were financially viable iii. Set precedent for the federal government to give land grants to large transportation projects iv.

Established structure by which loans were made from foreigners to fund large transportation projects. v. Creation of markets along the canal that resembled eastern markets (more manufacturing and metals in towns along the canal. k. What were four ways in which river transportation saw productivity improvements during this period? (12 points) vi. Hulls increased in length and breadth but declined in depth. vii. New decks added to house cargo and passengers viii. Less time at port ix. New technology was embodied in the steamboats which had a short lifespan x. River improvements (clearing debris) i. Lighter wood was used xii. Main deck left unenclosed. l. What was the major difference between the source of the productivity gains in canals and steamboats? Explain. (6 points) Canals were publically funded and steamboat improvements were privately funded. The fixed costs were higher for canals than steamboats and required public, or government, funding. 5. The period before the Civil War marks the birth of the U. S as an industrial leader in the global economy. m. List and explain four reasons presented in lecture and/or discussion for why industrialization began in Cotton Textiles. (12 points) iii. Great Britain had adopted technology in this industry. Easily transferred. xiv. Jefferson’s Embargo and blockade by British with the war of 1812 occurred shortly after industry was born and restricted competition. xv. Organizational Innovation by Lowell’s Waltham Mill – spinning and weaving under one roof. xvi. Organizational Innovation by Lowell’s Waltham Mill – recruited young women (strong, inexpensive, willing to do tedious work for hours on end) xvii. Price elasticity of demand for cotton textiles was high. A small reduction in price meant huge increases in quantity demanded. viii. Spillovers to wool xix. Income elasticity of demand for cotton textiles was high. A small increase in income meant demand increased for cotton textiles. xx. Spillovers to wool xxi. Learning by doing in textiles increased labor productivity xxii. Demand increased as growing population and growing incomes during this time period. n. According to Gavin Wright, what was the main reason that industrialization was delayed in the South? (6 points) A stable labor supply could not be found at wages required for running a successful textile mill. o. What was the American System?

Was it better than the methods used in Britain? Why? (8 points) Production by highly specified machines made up of interchangeable component parts with precision measurements There was a machine tool industry where technological spillovers could occur between the manufacturing of machines for differing industries. The American System was appropriate given the inputs available in the U. S. and British system was appropriate given the inputs available in Britain. The American system however, turned out to be better as industrialization continued. The mass production was “better” for growth in the long run.

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