ECON 2200 Final Exam

Rhode Island System

Slater's strategy of hiring families and dividing factory work into simple tasks - Samuel Slater- first industrial mill, built in Rhode Island in 1790 - He is known as the Father of the American Industrial revolution - He built the first successful water-powered textile mill in america - His Wife (Hannah Slater) invented two-ply thread and was the first American woman granted a patenting 1793

Dred Scott v. Sanford

Supreme Court case that decided US Congress did not have the power to prohibit slavery in federal territories and slaves, as private property, could not be taken away without due process - basically slaves would remain slaves in non-slave states and slaves could not sue because they were not citizens

As people lost confidence in banks early during the Great Depression, they withdrew currency from bank vaults. This would have caused the money supply, all else equal, to

decrease

The Fair Labor Standards Act of 1938 caused consumer surplus in labor markets to

decrease, and long-run output to decrease.

As Bonanza farms adopted mass-production technologies in the late 1800s, such as steam-powered plows, industry revenue to all farmers

decreased, and consumer surplus in agricultural markets increased.

Cotton is a normal good. All else equal, when the economy went into recessionary periods during the early 1800s, the demand for cotton

decreased, decreasing producer surplus in the market for cotton.

Toward the end of the Civil War, destroyed productive resources in the South, in the short run, caused the equilibrium price level to

increase, and output to decrease.

The Glass-Steagall Act of 1933 caused the short-run price level to

increase, and short-run real GDP to increase.

In the short-run, the Agricultural Marketing Act of 1929 caused consumer expenditure on food to

increase.

During the late 1800s, labor unions __________ economic efficiency. Today, labor unions __________ economic efficiency.

increased / decrease

The Housing and Urban Development Act of 1965 __________ the supply of public housing. This caused the demand for private housing to __________.

increased / decrease

The Elementary and Secondary Education Act of 1965 __________ economic efficiency, since the marginal social benefit for education __________ the marginal private benefit.

increased / was greater than

Between 1820s and 1850s the largest number of immigrants came to the US from _________

ireland - potato famine and other crop failures were responsible for the mass migration

Common Labor supply and demand shifters

pg 447

Common Short Run Aggregate Supply Curve Shifters:

pg 471

Affordable Care Act of 2010

requires an organization with 50 or more employees to make health insurance available to employees or pay an assessment and gives employees the right to buy health insurance from another provider if an organization's health insurance is too expensive

National Housing Act of 1934

- created the Federal Savings and Loan Insurance Corporation (FSLIC) - FSLIC insures deposits in savings and loan corporations > reestablished confidence in savings and loan corporations - In 1989 the govt abolished the FSLIC and transferred the responsibilities to the FDIC - Also created the Federal Housing Administration - promoted small loans to future homeowners and stimulated some building during the GD - Guaranteed mortgage loans of up to 30 years

Emergency Relief and Construction Act of 1932

- created the Reconstruction Finance Corporation - fed gov't agency that gave $2 billion to aid state and local gov't. Made loans to banks, railroads, mortgage assistance and other businesses - nearly all organizations repaid their loans - expanded public works during the GD - made Hoover the first president to engage in large public spending - disbanded in 1957

14th Amendment

- declared that citizenship requirements werethe same in all states - states that did not give freedom lostrepresentation in congress

Effects of WW2 Fiscal and Monetary policy

- deficit spending and expansionary policy led to temporary higher interest rates of inflation and output, and lower rates of unemployment - economists began to believe that larger deficit spending was an effective way to lower unemployment - other economists found that expansionary monetary policy also stimulated economic growth - most importantly, many believed that the government could successfully take on large-scale spending projects to counter recessions

James Buchanan

- did little to stop southern recession -· said it was illegal but not unconstitutional - The confederate States of America was born in 1861

Dutch East India Company

- established in 1602 and was the first company to issue stocks - by the 1800s stocks were common in europe

Fair Labor Standards Act of 1938

- established minimum living standards for workers engaged in interstate commerce, including provision of a federal minimum wage - led to additional unemployment, falling output and higher prices by establishing a minimum wage > stated at .25c / hr > also required time and a half for overtime pay > prohibited oppressive child labor - blacks and women suffered the most - an increase in minimum wage results in a larger labor force

Henry Finnell

- promoted using terraces and plowing along lands contours, preventing water runoff - he also argued that planting different kinda of cover crops and introducing crop rotation better nourished and held soil together

Hatch Act of 1887

- provided federal funding for state land-grant colleges to create agriculture expirement stations for soil, mineral and plant growth - 1870: 90% whites & 20% blacks could read and write - 1910: 95% whites & 70% blacks could read and write

Morrill Land-Grant Act of 1862

- provided federal grants of public lands to states tosupport education

Revenue Act of 1862

- repealed the 1861 act and instituted the type of progressive tax system we have today - progressive tax system: a tax that increases with higher levels of income - 3% tax on income over $600 and 5% on income over $10000

Hawley-Smoot Tariff (1930)

- significantly increased tariffs to 60% - still the highest import tax in US history - Caused other countries to increase tariffs onus goods - Stimulated short run domestic production and created inflationary pressure, as consumers substituted from foreignly to domestically produced goods - the combined higher tariffs had an uncertain effect on short-run US production

Agricultural Adjustment Act of 1933

- sought to raise crop prices by paying farmers not to plant. - replaced the Farm Board with the Agricultural Adjustment Administration (AAA) - Set acreage allotments and productionquotas, and paid subsidies to farmers to reduce production, casuing a stop in the sharp decline in farm prices - Supreme Court killed this program in 1936, stating that the govt direct involvement with the agr markets was too great and the act only taxed food processors

Coinage Act of 1792

-declared the US dollar as the base unit of account, founded on a decimal system

Office of Price Administration and Civilian Supply (OPA)

- Emergency Price Control Act of 1942 - made OPA an independent agency the could better regulate prices > OPA could now impose maximum prices on many goods and services through its General Maximum Price Regulation

Technological Advances

- Increase average real wages bc: - cost of porduction falls - output increases - average level of output per person is higher, leaging to higher wage - Although society may not share this output equally, sociteaty as a whole may consume more and is better off - Creative destruction (Schumpeter, 1942) - the process of innovation transforming an economy, in which innovation drives long-run economic growth -From 1913 to 1950, tech advance explains approximately 67.8% of per capita economic growth

Housing and Urban Development Act of 1965

- New housing subsidy programs and made federal loans and public housing grants easier to obtain - provided additional funding for public housing, gave rent subsidies to elderly and disabled, and offered subsidies to landlords - 3 billion was authorized to build 250,000 new public housing units

Diminishing marginal returns

- additional units of them yield smaller increases inoutput - means they have limits - occurs with physical and human capital

Effects of Anti-war demonstrations, riots and counterculture

- all contributed to large amounts of stagflation - US production fell significantly and inflation rose - unemployment sharply increased the year following when the government implememnted random draft lotteries and Wookstock gathered

Smith-Connally War Labor Disputes Act of 1943

- allowed the government to take over completely the operation of industries that interfered with the war effort

Quakers

- also felt persecuted by England - English dissenters who broke from Church of England, preache a doctrine of pacificism, inner divinity, and social equity, under William Penn they founded Pennsylvania - did not believe in killing and were peaceful - got along well with native americans

Robber Baron

- any businessman who allegedly used unfair tactics inbusiness or the stock market to obtain personal fortunes

Judicial Procedures Reform Bill of 1937

- appointed an Supreme Court Justice a 70+ years old helper to stack the court and push his programs through - angered both republicans and democrats, bc they thought FDR attempted to alther the balance of power between branches of govt

Beard-Hacker Thesis

- argued a transfer of political power from the South to the North resulted from the Civil War - Also stated that war stimulated economic growth and increased investment o THIS WAS LATER PROVEN WRONG

Legal tender Act of 1862

- authorized the government to print "greenbacks" - greenbacks were flat money with no intrinsic value - only acted as money because the govt legally declared them legal tender - greenbacks did not devalue as quickly as southern notes because money demand for greenbacks increased and the North began to win the war - Greenbacks funded about 18% for the North

Ironclad oaths or yellow dog contracts

- banned workers from joining a union or unionizing

Second Industrial Revolution

- began with the Bessemer steel process in 1860w andlasted until WW1 - period of great technological advance,investments in tools, machinery andeducation - firms grew to sizes never seen before > Laissez-faire capitalism - period of free tradeand lack of governmental control

positive externality

- beneficial side effect that affects an uninvolved third party -

Results of Falling Transportation costs

- buyers and sellers share transportation costs - results in lower final prices paid by consumers, so consumers purchase more goods - sellers price/unit received rises - Production become more profitable, so firms create more goods and services - demand for labor rises - Consumer Surplus: Better off - A --> A+B+C - Producer Surplus: better off - I--> G+H+I - Revenue to shippers: ? - Total Surplus: Higher - No Dead weight loss

Revenue Acts of 1940, 41, 42 and 44

- collectively increased income and corporate tax rates, and reduced exemption amounts, broadening the tax base - income tax grew nearly 640%, after accounting or baseline growth

Revenue and Expenditure Control Act of 1968

- created a temporary 10% tax surcharge on individuals and corporations - tax revenues as a % of GDP increased by 2.17% during 1968

Anaconda Plan

- created by Winfield Scott, A US Army general, that called for a naval blockade of southern ports - hard for South to import industrial goods and munitions - caused munitions costs to rise - overall southern munitions consumption fell from greatly reduced imports - hard for South to finance war through tariff revenue - hard for South to export cotton

Federal Reserve Act of 1913

- created the Federal Reserve as the central bank of theUS to monitor the health of the banking system, conduct monetary policy and hold bank reserves

Second Agricultural Adjustment Act

1938; encouraged farmers to plant less in exchange for payment - Established minimum prices for various agricultural goods, mostly corn, cotton and wheat - established quotas to prevent the massive overproduction seen during Hoovers Agr Marketing Act of 1929

Atlantic Charter

1941-Pledge signed by US president FDR and British prime minister Winston Churchill not to acquire new territory as a result of WWII amd to work for peace after the war

Articles of Confederation

A weak constitution that governed America during the Revolutionary War. - no centralized govt - national govt couldn't levy taxes, regulate commerce, or draft soldier - George washington was appointed as commander and Chief -

Indentured Servitude

A worker bound by a voluntary agreement to work for a specified period of years often in return for free passage to an overseas destination. - introduced to US by the Virginia Company in 1619 - owned mostly by British shareholders - by end of colonial period (mid-1700s) 3/4s of colonists were indentured servants - took an average of 4 years to pay off

Panic of 1819

Economic panic caused by extensive speculation and a decline of Europena demand for American goods along with mismanagement within the Second Bank of the United States. Often cited as the end of the Era of Good Feelings. * In short run, national banks can promote short run economic growth by gradually expanding credit, but they can also cause temporary recessions by tightening credit by too much * In the long run, expanding credit too quickly also results in much higher rates of inflation

Quebec Act (1774)

Extended Quebec's boundary to the Ohio River, recognized Catholicism as its official religion, and established a non-representative government for its citizens. *Historical Significance:* Colonists feared a precedent had been established in regards to the type of government that had been established in Quebec and resented the expansion of its borders into territory to which they had been denied access by the Proclamation of 1763.

Stabilization Act of 1942

FDR obtained direct power to limit prices and wages - "hold the line" order - FDR order requiring OPA to refuse all price increase requests, except under rare circumstances > sucessful in repressing inflation

Thomas Jefferson

First Secretary of State and later 3rd president - held Democratic-Republican views, which were popular in western and southern agrarian sections of the US - weak central govt - Believed in laissez-faire principles, which involve hands off govt, free trade and competition - promoted yeomen farmers - independent farmer who were self-sufficient and hardworking, and who valued liberty and freedom

By the 1920s, most businesses and factories had adopted the cost-cutting, scientific method of production developed by

Frederick Taylor

13th Amendment (1865)

Abolition of slavery w/o compensation for slave-owners - Johnson attempted to veto the amendment - many southern states passed "black codes" in response - limited the movement of blacks, prohibiting interracial marriage, and insisting blacks obtian state certifictiaons to hold certian jobs - most blacks became sharecroppers - continuting to live on their previous owners land

The West Coast's version of Ellis Island, build in 1910, was

Angel Island

Fall of Saigon (1975)

Capture of South Vietnamese capital that marked the end of the Vietnam War (April 30, 1975)

Stamp Tax of 1765 (Video)

Consumer Surplus: worse off - A+B+C --> A Producer Surplus: worse off - D+E+F --> F Govt Revenue: better off - 0 --> B+D Dead Weight Loss: inefficient - 0 --> C+E

Tennessee Valley Authority (TVA)

Developed the resources of the Tennessee Valley - authorized the construction of a series of dams to provide power and flood control to those living in the Tennessee River Valley

Second Battle of Saratoga

October 1777, major turning point in american revo - favored the Patriots

Olive Branch Petition

On July 8, 1775, the colonies made a final offer of peace to Britain, agreeing to be loyal to the British government if it addressed their grievances (repealed the Coercive Acts, ended the taxation without representation policies). It was rejected by Parliament, which in December 1775 passed the American Prohibitory Act forbidding all further trade with the colonies.

Banking Act of 1933 (Glass-Steagall Act)

Prohibited commercial banks from selling stock or financing corporations; created FDIC - FDIC insured demand deposits for each account up to $2500 - This level soon increased to $5,000 - This Act was a huge success, nearly all bank run disappeared

18th Amendment

Prohibited the manufacture, sale, and distribution of alcoholic beverages - was a supply side measure - it made production, transportation, and sale of alcohol illegal - speakeasies emerged - prohibition lead to the mafia and gangsters

Selective Service Act of 1940

Required that men between the ages of 21 and 35 register with local draft boards; marked the first peacetime conscription in United States history. - led to a large draft, which eliminated much of the unemployment from the GD - by the end of the war, and 12 million individuals volunteered, and 6 million were drafted - unemployment dropped from about 15% to 2%

Plantation efficiency increased the marginal productivity of each slave, causing

Short Run: increase demand for slavery Long Run: Uncertain

The annexation of Texas immediately resulted in _________

Short Run: increasing demand for slavery Long Run: ambiguous

What happened when Britain abandoned its gold standard in 1931

Short run - unemployment rose, prices and output fell

Commodity Output per Capita

South: - 1860: $77.8 - 1870: $47.6 - 1880: $61.5 North: - 1860: $74.8 - 1870: $81.5 - 1880: $105.8

Alexander Hamilton

first Secretary of the Treasury - had Federalist views, which were popular in commercial cities of the Northeast and port cities of the South - Strong central govt and broadly interpreted constitution - felt a national bank was essential to economic growth

The Peoples Party

formed in 1892, the populist party was created by farmers' alliances. The peoples' party supported the abolition of national banks and the government ownership of railroads - called for radically greater levels of government involvement in the economy - followed the greenback party

As farmers in Boise City used the new technology of gasoline powered tractors to plow up Buffalo grass, the marginal social cost of doing so was

greater than the marginal private cost.

Employer-sponsored health insurance

health insurance offered to employees by employers; offered as a benefit of employment - increased economic efficiency during the war, because it promoted competition in labor markets

Optimal tax rates during war are generally __________ than during times of peace.

higher.

Eli Whitney

his invention of the cooton gin in 1793 greatly increased the prouctivity of each slave - 2 workers could process 50 lbs/day compared to 1 lb/worker/day before the cotton gin * Short Run: Cotton Gin increased demand for slavery (when cotton price stable) * Long Run: Isolated effect is difficult to measure

Economists measure the money supply as a) _____________ + b) ______________.

a) Currency - hard cash that the public holds b) demand deposits - money in checking accounts

The Monetarist explanation focuses on a decrease in individuals a)______________ money, while the Keynesian focuses on a decrease in firms b)____________ money

a) willingness to save b) willingness to borrow

Declaration of Neutrality (1793)

allowed the US to trade with France and Britian while there were at war - resulted is a short period of prosperity

Industrial Revolution (video)

When Skilled and Unskilled are Complements: Demand for labor: - Consumer Surplus: Firms better off - Producer Surplus: rises -Unskilled Labor Wage: Decrease - Unskilled Labor Demand: Increase - Demand for skilled: increase When Skilled and Unskilled are Substitutes: - Input price: Decrease - Quantity Demanded: Increase - Supply Unskilled immigrants: Increase - Immigrant wages: Decrease - Demand of skilled workers: decrease - Producer Surplus: worse off - Society as a whole - better off

Efficiency wage

an above-market wage that a firm pays to increase workers' productivity - used by Henry Ford - higher wage allowed Ford to obtain a bigger pool of applicants to choose from - worker turnover decreased and effort increased - reduced worker strikes - only works if only 1 firm is paying a higher wage - if all firms matched Fords wage, higher production cost would have led to stagflation - rising prices and rising unemployment

Great Railroad Strike of 1877

becauseof intenese competition the Baltimore and Ohio Railroad company announced a paycut, which angered workers - a growing mass of protestors turned violent, attacking railroad yards, burning trains, and destroying track - showed the great discontent of the typical railroad worker - Hayes sent federal troops to break it up, injuring and killing many protestors - total damages amounted to over 10 million in propery damage and 30 workewr deaths - labor union membership grew rapidly after 1877

Compromise of 1877

blacks lost many rights they had won - stated that Hayes would be president in return for his promise to remove federal troops from the SOuth and end enforcement of Reconstruction Era legislation

Common Law System

body of law originating in England and derived from judicial decisions - laws were based on previous court decisions and the Supreme Court declared the constitutionality of these laws - Economic growth in common law is about 30% higher than in civil law nations

A profit maximizing monopoly finds it in its best interest to __________ its price when it faces lower marginal costs of production.

decrease

Refer to Figure 4.1 above. Suppose the South trades with the rest of the world. The full implementation of the Anaconda Plan, during the Civil War, causes Southern producer surplus to

decrease by area "b + c + d"

The Hawley-Smoot Tariff Act of 1930 led to other nations increasing their tariffs on U.S. goods. In U.S. exporting industries, these higher foreign tariffs caused producer surplus

decrease, and consumer surplus increase.

FDR's "hold the line" order in 1943 caused producer surplus in regulated markets

decrease, and consumer surplus to change uncertainly.

Suppose the world price for widgets is higher than the domestic price. If the country opens to free world trade, domestic consumer surplus in the widgets market will

decrease, and domestic producer surplus will increase.

For most of the 1920's, the government ran budget surpluses. All else equal, these surpluses caused the equilibrium real interest rate to

decrease, and investment to increase.

In its entirety, the National Industrial Recovery Act of 1933 caused long-run employment to

decrease, and long-run unemployment to increase.

To stop gold from flowing out of the U.S. during the early 1930s, the Federal Reserve increased interest rates on government bonds. This policy caused investment to

decrease, and national saving to decrease.

All else equal, large budget deficits run during World War II caused public saving to

decrease, and private saving to increase.

The Sugar Act of 1764 placed new excise taxes on wine in the colonies. In the market for wine, this act caused consumer surplus to

decrease, and producer surplus to decrease.

The Homestead Act of 1862 caused some migration out of cities. All else equal, this migration caused consumer surplus to

decrease, and the equilibrium wage to increase.

During the late 1920s, the Federal Reserve increased the discount rate. All else equal, this caused the money supply to

decrease, and the long-run real interest rate to not change.

A clothing manufacturer during WWII offers a low-end line of clothing (inferior good) and a high-end line of clothing (normal good). Price ceilings exist in both markets. As incomes rise, shortages for the low-end line of clothing

decrease.

If the U.S. is on the right-hand side of the Laffer curve, a small increase in tax rates causes income tax revenue to

decrease.

Suppose that new discoveries of valuable resources in America increased the demand for indentured servants. Holding cost of the voyage and other things the same, newly immigrating indentured servants' labor terms (years of service)

decrease.

The Agricultural Adjustment Act of 1933 caused total surplus in agricultural markets to

decrease.

Suppose that before the Stock Market Crash of 1929, the government taxed optimally. The stock market crash caused the optimal tax rate along the Laffer curve to

decrease. Hoover increased tax rates during the Great Depression.

excise tax

a tax on the production or sale of a good - decrease economic efficiency, because thy decrease buyers and sellers economic welfare

The Gold Reserve Act of 1934 made it illegal for Americans to privately own gold (minus rare coins, jewelry, etc.). This act

decreased the severity of the Great Depression.

The Revenue Act of 1924 lowered the bottom marginal income tax rate. All else equal, in the market for labor, this act

decreased the wage firms paid, and increased producer surplus.

Before the Civil War, plantations were perfectly price discriminating monopsonies. After the Civil War, they became one-wage monopsonies. Total surplus in the market for labor

decreased.

During Hoover's administration, the economy experienced __________. For workers whose salaries were fixed by contract, real wages _______

deflation / rose.

Frederick Taylor

developed scientific management (Taylorism) - may be the most important technological advancement from the 2nd IR - he was a mechanical engineer who focused on speed, efficiency and specialization - firms began to hire efficiency experts - Henry Ford perfected taylorism with his assembly line

Border States

in the civil war the states between the north and the south: delaware, mayland, kentucky, and missouri - Emancipation Proclamation abolished slaveryt only in Confederate states, not in border states

Bretton Woods Agreement (1944)

incorporated fixed exchange rates, built-in flexibility, and created IMF and World Bank. - countries would tie their currencies to the US dollar at fixed exchange rates - US promised to redeem an ounce of gold for $35

Early during the Industrial Revolution, unskilled and skilled labor were complements of production. All else equal, a decrease in the wages paid to unskilled labor caused the equilibrium wage for skilled labor to

increase

Suppose the price elasticity of demand for steel in the late 1800s equaled 6. This means that a 1% decrease in the price of steel caused industry revenue to

increase by 5%.

The Second Agricultural Adjustment Act of 1938 caused total surplus in agricultural markets

increase, and economic efficiency to decrease.

The Social Security Act of 1935 created unemployment insurance. All else equal, the creation of unemployment insurance alone caused the long-run price level to

increase, and long-run unemployment to increase.

Outlawing yellow-dog contracts during Herbert Hoover's administration, in the long run, caused the equilibrium price level to

increase, and output to decrease.

In the market for textiles, increased specialization from the Industrial Revolution caused consumer surplus to

increase, and producer surplus to change uncertainly.

During the American Revolutionary War, the British counterfeited large numbers of Continentals. All else equal, this caused the equilibrium price-level for Continentals to

increase, and the equilibrium quantity of Continentals to increase.

During the early 1800s, the construction of canals caused the price that sellers received for goods to

increase, and total surplus in these markets to increase.

The invention of the steam boat caused the price that plantations received for cotton to

increase, causing the demand for slaves to increase.

An increase in government spending causes aggregate demand to

increase.

Eli Whitney's invention of the cotton gin, in the short run, caused consumer surplus in the market for slave labor to

increase.

Suppose that Lyndon B. Johnson's advisors estimated that the marginal propensity to consume was 50%. If this was true, then an increase of $10 billion on Great Society programs would have

increased real GDP by $20 billion

Revenue Act of 1943

increased the excess profits tax rate from 50% to 95%, and also increased federal excise taxes on alcohol, jewelry, telephones, and many other consumer goods.

Revenue Act of 1936 ("Soak the Rich" Act)

increased the top marginal income tax rate from 63% to 79% - Caused rich to find loopholes to avoid high taxes

During the Civil War, the South increased the supply of Confederate Notes. In the market for money, the equilibrium price level of Confederate Notes

increased, and equilibrium quantity increased.

John Deere was a yeoman farmer in the 1860s who produced food. All else equal, when John Deere replaced his iron plow with a steel plow, his total revenue

increased, and the equilibrium price of food did not change.

Suppose that during the Great Depression, the government paid workers to plant trees, but all these trees died in the same year. GDP

increases.

Eliza Lucas Pinckney

introduced indigo to the South Carolina colony after she learned how to grow it on her family's plantation - one of the first US female entrepreneurs

Gilded Age (1870-1900)

implies that beneath the surface of a thin layer of gold (strong economic growth and prosperity), there was much poverty and corruption in both business and politics

Adolf Hitler came to power as Chancellor of Germany directly after which event?

the U.S. stock market crash

negative externality

the harm, cost, or inconvenience suffered by a third party because of actions by others * farmers did not account for the cost to others (external cost) - when negative externality exists - market failure exists

Given upward sloping supply and downward sloping demand, a $1 excise tax on any good or service causes the price buyers pay to increase by

less than $1.

Revenue Act of 1964 (Tax Reduction Act)

lowered income taxes by 20% across the board. - Across the board - higher-income enjoys greater benefits b/c rates are progressive. - wealthy enjoyed most of these tax cuts - benefits to lower income individuals were negligible

Colonial Women

many chores, took care of children, spun thread or yarn, sewed cloth into clothes, prepared and - helped maintain social structure and promoted specialization in the household - could own property if unmarried or widowed - could not vote

A demand curve illustrates the

marginal benefit for consuming one more unit.

Compared to the random lottery drafts of Vietnam, the South's conscription during the Civil War was __________ efficient, and the North's conscription was __________ efficient.

more / more

Underground Railroad

only marginally decreased the southern profitability of slaves - only 2-3% of slaves escaped on the railroad - slave catchers should try and bring escaped slaves back on the reverse underground railroad

During the late 1920s, the Federal Reserve increased the discount rate. At the original price level, a

shortage of money existed, so the price level fell.

Gold Standard Act of 1900

signed by McKinley. It stated that all paper money would be backed only by gold. This meant that the government had to hold gold in reserve in case people decided they wanted to trade in their money. Eliminated silver coins, but allowed paper Silver Certificates issued under the Bland-Allison Act to continue to circulate. - from 1898 to 1915 gold stocks from South Africa and the Yukon were discovered, increasing the supply of gold in the US causing the value of each dollar to fall

The Federal Emergency Relief Administration provided large amounts of funding toward

small-scale local projects, such as sewers, sidewalks, and city halls.

New England Colonies

specialized in producing lumber, ships, barrels, fish, livestocks and furs

Say's Law

supply creates its own demand - states that unregulated economies fully utilize resources automatically, maximizing societies welfare

During the early 1800s, Federalist views

supported a strong, centralized government.

Federalists

supporters of the Constitution - wanted stronger national govt

After Robert E. Lee retreated from the Battle of Gettysburg, a

surplus of Confederate notes immediately resulted, causing prices to rise.

perfectly price-discriminating monopsony

pays each worker his or her reservation wage - the least each worker is willing to work for

Technological Advance's Effect on Aggregate Employment and Unemployment and Capital Stock

pg 126-128

Fed's Attempt to Curb Speculation in the Stock Market

pg 236-238

Table 12 - Labor Union Membership Rate

pg 276

Reagans, Kennedys and Coolidge's tax cuts compared

pg 334

Warren G. Harding

president who called for a return to normalcy following WWI - ran on low taxes, high tariffs, farmers assistance and opposition to the League of Nations - believed it was time to focus on american business - Had a stroke in 1923 and Coolidge of Vermont replaced him

monetizing the debt

process of creating enough additional money to offset federal borrowing so that interest rates remain unchanged - when the federal reserve inflates away the governments debt obligation - increased the US money supply because the treasury printed more dollars to back each new ounce of gold

Revenue Act of 1945

repealed the excess profits tax and cut income tax rates across the board - signed by truman - top marginal tax rate fell from 94% to 86.45% - lowest marginal tax rate fell from 23% to 19% - corporate taxe rate fell from 40% to 38%

Revenue Act of 1921

repealed wartime excess profits tax - a tax intended to capture and additional profits that firms made from the war - top marginal tax rate fell from 73%to 56% - lowest marginal tas rate stayed at 4% - Income tax revenue as a % of GDP fell 34.25% from 1921 to 1922

Nationalbanking Acts of 1863 and 1864

required that all national abnks invest in a portion of money into government bonds, used to finance the civil war, and increased the Unions borrowing power after the civil war - not crucial to the economic developmetn of the United States during the 2nd Indurtial Revolution

Homestead Act of 1862

this allowed a settler to acquire 160 acres by living on it for five years, improving it and paying about $30 - signed by Abraham Lincoln - Lincoln was aware this act would cause conflict between homesteaders and indians - allocation of land was highly inefficient - about 60% of homesteaders failed - over 10 times more land was sold by auction rather than given away by the homestead act - native americans were the largest demographic to suffer from the homestead act - battles between homesteaders an natives killed many - "white mans disease" (small pox) killed many indians

Homestead SteelStrike of 1892

- Henry Frick refused to renew higher wage contracts that were about to expire for a group of unionized workers at Carnegie's Homestead Steel plant called the Amalgamated Association - worker pay fell from between 18 to 24% - Frick locked the worked out and violence ensued - leaving 12 workers and guards dead - Pennsylvania governor sent 8000 militia with gatling guns to break up the strike - workers returned with lower pay

Revenue Act of 1924 effects on poor

- Lower tax rate increase incentive to work - because lower-income workers greatly increased their labor hours, it was possible for income tax revenue to increase - lead to lower inflationary pressure - lead to greater increase in output - lead to larger reduction to unemployment given supply-side theory

Ulysses S Grant

- wartime hero elected in 1868 - 15th amendment - no American could bedenied the right to vote based on color

Famous Robber Barons

1) Rockefeller (Standard Oil) - pg 136 2) Carnegie (US Steel) - pg 141 3) Vanderbilt (Transportation)

Transportation Revolution

A period of rapid growth in the speed and convenience of travel because of new methods of transportation.

Whiskey Rebellion of 1791

American uprising over the establishment of a federal tax on liquor; was quickly ended by George Washington and 13,000 troops. *Historical Significance:* Demonstrated that the new national government had the willingness and ability to suppress violent resistance to its laws. - resulted from hamiltons first federal excise tax on distilled spirits

Whig Party

An American political party formed in the 1830s to oppose President Andrew Jackson and the Democrats, stood for protective tariffs, national banking, and federal aid for internal improvements

diminishing marginal utility

Decreasing satisfaction or usefulness as additional units of a product are acquired - $100 makes you less have if you are rich rather than poor - so a tax cut to the rich affects their less than an equal cut to the poor

monopsony

a monopoly buyer of an input and chooses what amount to pay for that input

Refer to Figure 3.3 above. Plantations' breeding of slaves increased the supply of labor. Given perfect price discrimination by plantations, this increase in supply caused producer surplus to increase by

$0

Refer to Table 5.8 above. Consumer surplus for the second unit under monopoly equals

$1.

Suppose in 1920 an A&P store manager wants to reduce worker shirking. The market wage for employees is $5 per day, each worker gains $2 from shirking, and the probability of detection is 10%. Assuming a one-period problem, the A&P manager must pay at least

$25 per day

Refer to Table 5.8 above. The profit-maximizing price that a monopoly charges equals

$9, and the monopoly produces 3 units.

Compromise of 1850

(1) California admitted as free state, (2) territorial status and popular sovereignty of Utah and New Mexico, (3) resolution of Texas-New Mexico boundaries, (4) federal assumption of Texas debt, (5) slave trade abolished in DC, and (6) new fugitive slave law; advocated by Henry Clay and Stephen A. Douglas

Neutrality Act of 1937

(FDR) The Neutrality Act of 1937, passed in May, included the provisions of the earlier acts, this time without expiration date, and extended them to cover civil wars as well. Further, U.S. ships were prohibited from transporting any passengers or articles to belligerents, and U.S. citizens were forbidden from traveling on ships of belligerent nations, however private ships can come at on risk - reversed these previous acts, temporarily allowing the US to sell arms and supplies on a "cash and carry" basis > countries could trade with US if the used their own ships and paid in full

Seven Years War

(1756-1763 CE) Known also as the French and Indian war. It was the war between the French and their Indian allies and the English that proved the English to be the more dominant force of what was to be the United States both commercially and in terms of controlled regions. -left Britain with high war debts, which King George III felt the colonists should help pay

Elementary and Secondary Education Act

- 1965 - Provided federal funding for primary and secondary education and was meant to improve the education of poor people. This was the first federal program to fund education. - provided significant federal funding for education, emphasizing equal access to education - started Project Head Start - funding toward low-income pre-school education

Supplemental Nutrition Assistance Program (SNAP)

- A food and nutrition service that works with state agencies nutrition educators, and neighborhood and faith-based organizations to offer nutrition assistance to millions of eligible, low-income individuals and families and provides economics benefits to communities.

Income Tax

- After the civil war, Congress eliminated the income tax in 1872 and focuses on import tariffs and excise taxes on alc and tobacco - Congress reintroduced the income tax in 1894 and 1895, but the supreme court declared it unconstitutional - to be constitutional the tax had to be apprortioned, meaning states with double the population pay double the income tax - it was not until 1913 tghat the 16th amendment dropped the apportionmentt requirement and made the income tax permanent and constituional

Effects of the National Industrail Recovery Act

- Aggregating the economic effects of monopolization, increased unionization and incresed govt spending on large scale public projects > as a whole did combat inflationary pressure in long and short runs - Short run - effects to production, unemployment and employment are uncertian since monopolization and unionization offset any benefits from increased govt spending - Long Run - decreased long run output and employment and increased long run unemployment

Slave Trade

- Blackslaves worked on southern plantations and in urban areas and ports in middle and north colonies - Blacks quickly became the primary race sold - Native americans escaped easily - caused the demand for indentured servants to decrease

Henry Clay's American System

- Congressman from Kentucky and Speaker of the house - Plan for economic growth: establish a protective tariff, establish a national bank, and improve the country's transporation system

Social Security Act of 1935

- Created both the Social Security Program and a national assistance program for poor children, usually called AFDC. - created a retirement plan for workers over 65 and both the employee and employer paid into the fund through payroll taxes - Established unemployment insurance for laid-off workers > paid unemployment benefits to aid workers who lost their jobs > was initially about 12 weeks, but today it is generally 26 weeks

Economic of Labor Unions

- Economists generally believe a consequence of labor unions is higher unemployment - because labor unions collectively bargin for higher than competitive wages - at these wages the firms choose to higher less employees - at a higher wage more people are looking for employment, creating a surplus of workers - because of this economists believe labor unions are inefficient - labor is not allocated to its highest-values use at its lowest cost - Longer term consequence of laboe unions is the supply of non-union workers increases, depressing non-union wages outside of the unionized industry - although they are inefficient, labor unions served a purpose that increased economic efficiency during the late 1800s

North Financial Troubles

- North had a comparative advantage in production of firearms and munitions, and had better railway system - North had 92% of the nations industries and 71% of the nations railroads - North also have 3 white men to 1 white man in the south - Norths inflation during the war was about 20% - centralized organization contributed to its success - power of executive branch expanded - Lincoln placed parts of Kentucky under martial law and imprisoned over 14,000 people who oppsed the war - lincoln also ordered the writ of habeus corpus suspended for many individuals

Republican Party (1861)

- Northern democrats who opposed slavery -· Abraham Lincoln was the first Republican President

North Real Wages during Civil War

- One might expect real wages to increase over the war because: - 1) demand for soldiers increased and North had better financing - 2) as North began to win war, demand for northern currency increased, mitigating inflationary pressure - but actually REAL WAGES for union soldiers FELL because: - 2/3s came from high amounts of unanticipated inflation caused prices to rise more quicly than the nominal wages soldiers earned - 1/3 fall was from real factors such as newly instituted income taxes and higher tariffs - real wages fell 20%

Fugitive Slave Act

- Part of the Compromise of 1850 - A law that made it a crime to help runaway slaves; allowed for the arrest of escaped slaves in areas where slavery was illegal and required their return to slaveholders - "Bloodhound Law"

Social Security Effects

- Payroll taxes and unemployment insurance had an uncertain effect on overall prices, but they increased unemployment, decreased employment, and decreased output - as a whole social security discourges work and encourages peopel to retire earlier, reducing the economies employment and output

John F. Kennedy

- President of the US during the Bay of Pigs Invasion and the Cuban Missile Crisis - first Keynesian president, since he attempted to cut taxes and increase govt spending - Established the Peace Corps - encouraged young men and women to volunteer in developing countires - Executive Order 10988 of 1962 - gave public sector workers the right to unionize

Appendix Pages:

- Price Ceilings: 419 - Price Floors: 421 - Elastic and Inelastic: 424- 425 - Taxation in a market: 428 - Subsidy in a Market: 430-431 - Exporting Country: 434 - Importing Country: 435 - Tariff for Importing Country: 437 - One-price monopoly (table / chart question): 440 - One-wage monopsony: 456 - Monopoly: 441 - Labor Union

Revenue Act of 1938

- Reduced taxes on large corporations and increased taxes on smaller businesses - revised the law and closed many loopholes used to avoid taxes

Southern Financial Troubles

- South faced much greater financial difficulties than the north - taxes and tarriff revenue only funded 10% of the war - Currency Reform Act of 1864 - decreased the money supple by approximately 1/3, but this act only temporarily stabilized prices - Used the curb the inflation caused by the South printing money during the war - As it became clear the South was going to lose the war, money demand for confederate notes decreased, lowering their value and increasing prices - Greatest inflation occurred when General Lee retreated form Gettysburg - Overall inflation from 1861 to 1865 was about 9000% · *When the turnover of a currency increases, economists say that the velocity of money increases - if turnover increses greatly enough, hyper inflation ensues

Agricultural Marketing Act of 1929

- This act established the Federal Farm Board, a lending bureau for hard-pressed farmers. The act also aimed to help farmers help themselves through new producers' cooperatives. As the depression worsened in 1930, the Board tried to bolster falling prices by buying up surpluses, but it was unable to cope with the flood of farm produce to market. - Farm Board gave some loans to farmers but mostly purchased various agricultural goods - Caused the number of farmers to increase and production also increased because the govt would buy the crops > this decreased agricultural prices again - Farm Board went bankrupt in 1932 from attempting to stabilize prices without implementing quotas - Farmers in the long run grew more food - Short run - govt purchased agr goods, stored them in silos and did not redistribute them to the poor > increased prices but increased starving people

Moral Hazard

- When the act of insuring an event increases the likelihood that the event will happen - refers to the situation where people act riskier or push costs onto others once they face less risk - this decreases economic efficiency

Equal Employment Opportunity Commission (EEOC)

- a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it - created by Civil rights Act of 1964

Voting Rights Act of 1965

- a law designed to help end formal and informal barriers to African-American suffrage - attempted to end unequal voting requirement restrictions

Executive Order 9981 in 1948 (Truman)

- abolishing racial discrimination in the military - not until after the Korean War (1953) that military integrated

Revenue Act of 1864

- about doubled these ratesm and income taxes gained the Union about $55 million to finance the war - Income tax only funded 2% of the war

Revenue Act of 1932

- act signed by Hoover that raised taxes, especially on the wealthy...their rate went from 25-63%, bottom rate from 2-4% > close to WW1 levels - one of the most damaging acts to economic growth passed during hoovers term - income tax revenues as a % of GDP fell 33.65% - reduced aggregate demand, causing output to fall and unemployment to rise - increased corporate tax rate from 12% to 13.75% - a relative increase of nearly 15% > made investment projects less profitable, when firms were already having trouble paying off fixed rate loans - depressing interest rates, saving and investment

Norris-La Guardia Act of 1932

- act that prohibited employers from punishing workers who joined unions and gave labor the right to form unions - effectively promoted labor unions through outlawing yellow dog contracts > yellow dog contract - employers required employees to sign a contract agreeing not to join a union > it also outlawed court injunctions against nonviolent labor disputes such as strikes, boycotting and picketing - in general labor unions collectively bargained for higher wages > firms responded to the higher wages by reducing labor hours and laying off employees, increasing unemployment > lower employment led to reduced output and higher prices nation wide

Townshend Acts (1767)

- established that parliament had the right to tax the colonies and increased tax enforcement and collection on certain imported colonial goods *Provisions:* Imposed a tax - to be paid at American ports - on items produced in Britain & sold in the colonies, including paper, glass, lead, paint, & tea. Suspended the New York Assembly for refusing to provide British troops with supplies. Established an American Board of Customs & admiralty courts to hear cases of smuggling. Issued Writs of Assistance. *Historical Significance:* Led to a boycott of British goods, the Circular Letters, John Dickinson's "Letters from a Pennsylvania Farmer," and unrest in Boston.

Food Stamp Act of 1964

- expanded the federal program to help poor people buy food - allowed eligible low income households to purchase food stamps from the govt at below market value - those who recieved food stamps paid lower real prices, so they benefited - farmers and frocery stores benefited, since subsidization drive up market prices for food - the two groups what do not benefit are non-eligible food stamp customers and taxpayers

Bonanza Farm Effects

- felt consequences of lower cost mass producing technologies - demand for food as inelastic during the late 1800s - cost saving technology lowered the price for agricultural product, causing downward pressure on revenue - after accounting for a large decrease in price but small increase in units sold, overall revenue to the farming industry fell - consumers benefited - more food by paying less - yeomen farmers could not compete with the mass quantites

Purtians

- felt persecuted in england Radical Protestant wanted to purify the Church of Catholic ritual - Manifest Destiny - a divine mission to spread westward, and pressured many native americans to convert

Simon Linguet

- first coined the term "wage slavery" in 1763 - he argued that wage slaves were not as free as slaves, since a slaves master had the incentive to pay for food, shelter and clothing, but wage slave was at the mercy of someone to hire him or her - Lincoln disagreed saying wage slaves had the opportunity to better their position, while slaves did not

War bonds

- funded about 28% of the war - firms had fewer funds available for investment - short run interest rates rose and crowed out investment - because the Fed purchased some bonds with newly printed money, deficit spending did not crowd out investment as much as it could have

Effects of Second Agricultural Adjustment Act

- higher prices decreased amount buyers bought, making buuyers worse off - farmers increased production in response to higher pricess > farmers were better off - since price could not longer efficiently allocate these goods, surpluses resulted - Program was economically inefficient: > minimum prices resulted in additional production > govt taxed other markets, reducing their production, to subsudize agr markets * although inefficient, some beleived it was the right thing to do

Revenue Act of 1861

- imposed a flat tax of 3% on income over $800 a year - very low rate compared to today

Effects of TVA and CCC

- inceased govt spending stimulated aggregate demand, combating inflation and reducing unemployment in the Short Run - govt counted its workers that would have been unemployeed with out govt intervention as unemployeed

Morrill Tariff Act of 1861

- increased tariff rates from 5 to 10%, but the war soon increased these rates more - In 1867 the average tariff duty was 47% - higher priced consumer goods was the consequence of higher tariffs

Effects of Revenue and Expenditure Control Act of 1968

- increased taxation lowered consumers willingness to pay for goods and services, mitigating inflation > but large amounts of deficit spending committed to Vietnam stimulated aggregate demand and created inflationary pressure

Effects of Fords lowered production costs pg 216-217

- lower cost per vehicle allowed him to meet price-sensitive customer - increasing over all revenue - total consumer expenditure rose - not until late 1920s that Ford began losing market share to General Motors - because GM used product differentiation

Copperheads

- name given to northern democrats who supposed the confederacy - wanted immediate end to the war and for the US to accept the institution of slavery - Copperheads thought their name stood for the "head" of Liberty, who was on large cent coins

Public goods

- not goods the govt can provide - goods that are non rivalrous, meaning one persons consumption leaves no less for others - non excludable

Labor Unions

- organized collection of workers that argued for saferworking conditions, shorter working hours, higher wages - industrialists responed to strikes with lock outs, starving the workers into submission - did this by hiring private security gurads, mostly by Pinkerton Govt Services - First Labor Union was the Knights of Labor (1869) - one of the first unions to lobby for 8 hour work day, child labor laws, and peaceful negotiaions between labor and management

Civil Rights Act of 1964

- outlawed discrimination based on race, color, religion, sex, or national origin - banning certain types of discrimination in most private and public schools, restaurants, hospitals, theaters, and work places

One-wage monopsony

- pays an equal wage to all wokers, and it chooses the profit-maximizing wage it pays - finds it profit maximizing to hire fewer individuals and pay lower wage

third degree price discrimination

- practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group - the practice of charging different prices by group

Califorina Alien Land Law of 1913

- prohibited "aliens ineligible for citizenship" from owning agr land or buyinh long term leases in califorina - applied to Chinese, Indian, Korean and Japanese farmers - was not until 1952 that the Supreme Court declared alien land laws was a violation of the 14th amendment * Sei Fuji v. California

Chinese Exclusion Act of 1882

- prohibited and new Chinese from entering the country - one of the most restrictive racial bans on immirgration during American history - in response to a popular belief that the Chinese were responsible for depressed wages

Economic Explanations of the Great Depression: 1) The Keynesian Explanation

- states that a collapse in the desire for new capital formation occurs because consumption falls - if individuals become over extended in credit, they must make larger installment payments and reduce current consumption > the fall in current consumption causes firms to reduce output, so investment demand collapses - Maynard Keyes believed the excess saving was draining on the economy and caused the depression - Also believed the govt could replace some fall in investment by spending more and reducing taxes - Problem with this is that interest rates must eventually fall if there is a surplus of saving > given a surplus of saving, competitive pressures cause lenders to offer lower interest rates and firms to respond by borrowing more - Deflation increased the value of each dollar over time and made lenders hoard cash rather than lend it to firms > this hoarding cash earned a positive rate of return that was risk-free and it decreased the amount of funds available to firms

Economic Explanations of the Great Depression: 2) The Monetarist Explanation

- states that the contractionary monetary policy leads to a fall in the supply of saving - In the short run, the Fed contracted the money supply, dollars and coins flowed out of the financial system > Caused saving and investment to decrease, and with ** Table 11: Money, Output, and Interest Rates from 1929 to 1933 on pg 236

Panic of 1907

- stock market crash, which led to a series of bankruns, thousands of firms failed - caused by bank runs on Knickerbocker

Economis of Medicare and Medicaid

- subsisies have lowered the cost health insurance to those insured, increasing healthcare consumption > this caused an increased consumption which drove price up - moral hazard and an aging population have increase the price of healthcare

Adverse Selection

- the problem of incomplete information - of choosing alternatives without fully knowing the details of available options - leads to market failure because only the highest-risk people choose to purchase insurance, and economy efficiency decreases - the govt can intervene, increasing economic efficiency by either subsidizing insurance or requiring everyone to carry it

Haymarket Riot of 1886

- turned public opinion against the Knights of Labor, and its membership declined afterward - during a public gathering, a radical threw a bomb that killed 6 police officers and the media blamed the Knights of labor, declaring the group anarchists

Civil War Effect on Economy & Investment

-On a national level, the Civil Wars effect to aggregate demand is uncertain, although conflicting factors ensure that aggregate demand neither greatly increased nor decreased - most govt expenditure was on food, clothing (normal goods) affecting aggregate demand very little - increase spending on munitions anf firearms increased aggregate demand very little - only accounted for 1% of US iron input - Money creation stimulated aggregate demand as the willingness to pay for good increased - Although, houndreds of thousands of people died, decreasing the demand for production *(effect of private sector pg 110)

Historical Explanations for the GD

1) Agricultural Problems > many Europeans rebuilt their farms after WW1 which caused a shape decline in domestic agricultural goods > Tariffs placed on the us agr exports also hurt domestic farmers >From an economic stand point it is unlikely this caused the GD > Agr's total national output fell from about 17.17% to 10.78% 2) Uneven Distribution of Wealth > During 1920s, the rich became richer, but the standard of living also increased for the poor > In 1929, .2% of the population controlled 40% of the nations savings > the inability to consumer (for the poor) led to a decrease in firm investment and layoffs of workers > Probably was not the cause of GD - Cooligde gave large tax cuts to poor and middle class in 1924, increasing their disposable income 3) Over-Extension of Credit and Installment Buying > Americans bought 75% of automobiles, 80% of house hold appliances and 70% of furniture on credit > firms continuing to produce new goods even tho some consumers couldn't afford them left to layoffs in consumer goods industries > Unlikely that over extension of credit alone caused the GD but it may have increased the magnitude 4) Buying Stocks on Margin > Many individuals had too much or all of their money tied up in the stock market 5) Stock Market Crash of 1929 > Many believe that this is the primary cause of the GD > Many individuals lost their entire savings > firms found it harder to obtain future financing through issuing stocks > if something else caused the stock market crash , then that is the actual cause the depression

Farmers Difficulties (1880s and 1890s)

1) Europe and South America increased their agricultural production, lowering domestic price 2) Europe and South America increased tariffs on US agr products, decreasing exports an prices for US farmers 3) US govt was taking greenbacks out of circulation, increasing the value of each one, but causing deflationary pressure and agr prices to fall 4) better production technologies in agr lowered the cost of farming, depressing prices further - Bonanza farms - large scale farms that used mass production technologies. - Bonanza farms ranged from a few thousand to 7 thousand acres

Common Investment Demand Curve Shifters

1) Firms become more optimistic about future profits: > Increase 2) Firms operating costs rise: > Decrease 3) Technological Advance Lowers Production Costs > Increase 4) Govt increases the Corporate Tax Rate: > Decrease 5) Govt offers investment tax credits to firms: > Increase

Common demand shifters

1) Income Increases for a Normal Good: > Increase 2) Income Increases for an Inferior Good: > Decrease 3) Price of Substitute Increases: > Increase 4) Price of a Complement Increases: > Decrease 5) Number of Buyers Increases: > Increase 6) Tastes and Preferences for the Good Increase: > Increase 7) Buyers Expect the Price of the Good to Decrease in the Future: > Decrease

Common Long Run Aggregate Supply Curve Shifters:

1) Increase in Minimum wage increases unemployment: > Decrease 2) Increase in Labor Union Power Increases unemployment: pg 470

Common Saving Supply Shifters

1) Individuals level of income increases > Increase 2) individuals find themselves in more debt > Decrease 3) Govt reduces tax rates on interest income > Increase 4) Fed reserve increases the money supply in the short run: > Increase 5) Fed increases money supply in Long run > No Change 6) Govt Runs a Larger Budget deficit: > decrease 6) Govt Runs a Smaller Budget Surplus > decrease 7) Govt Runs a larger budget surplus > Increase

Common Supply Shifters:

1) Input Cost Increases: > Decrease 2) Technological Advance Lowers Production Costs: > Increase 3) Number of Sellers Increases > Increase 4) Better Weather Produces more Agricultural Crops: > Increase 5) Sellers Expect the Price of the Good to Increase in the Future: > Decrease

Aggregate Demand Curve Shifters

1) Lower income taxes increase consumption: > Increase 2) Rising Corporate Taxes Reduce Investment: > Decrease 3) Increased Govt Spending: > Increase 4) Reduced Foreign Trade Restrictions Increase exports: > Increase 5) Money Supply Increases: > Increase 6) Higer domestic tariffs cause consumer substitution from foreign to Domestically produced goods > Increase 7) The Population Increases: > Increase

4 Factors that lead to economic growth: * How they affected the Second Industrial Revolution

1) Physical Capital- tools, macheriney, etc * Acccumulations of steel(railroads & skyscraper), machinery(textiles), and refineries (petroleum) 2) Human Capital- knowledge and education of workers * Factories began employing large #s of workers * nearly 1/3 americans worked in manufacturing (1870) * nearly 1/2 americans worked in manufacturing (1900) * In South most sharecroppers were black and had little opportunity 3) Natural Resources- productive assets in the environment, undisturbed by society 4) Technoligical Advances- a better or more efficient way to produce goods * most important factor that contributed to economic growth * first skyscraper (built by Home Insurance Company in Chicage) was only possible bc of steel * transcontinential railroad connected the east and west coasts, lowering shipping costs

American System (Video)

1) higher tariffs 2) National bank 3) subsidies to transportation

Problems with printing Continentals

1) printing too many increased money supply, causing value to fall 2) british wages economic war on the colonies by counterfeiting large quantities 3) Continental Congress could not declare these notes be used as the only legal tender, so colonists demand decreased as inflation rose - decreasing value more

Why Public Sector unionization is much higher than private section unionization:

1) public sector employees have lower turnonver rates, so it is easier for them to organize 2) public sector firms face less competition > public sector firms can more easily pass costs off onto taxpayers or bondholders 3) govt tends not to prosecute its own sector against anti-trust law 4) demand for many public sector goods is inelastic

Reasons for economic growth and western expansion

1) rising corn and wheat prices made moving Northwest profitable, and rising cotton prices made moving west lucrative 2) Gold Rushes of 1849 and 1859 - Discovery of gold in California increased demand for labor to mine it - discovery of gold increased money supply, stimulating short run growth 3) govt subsidies towards and technological advances in transportation - Fed and state govts funded roads and canals

Civil Law System

A system of law based on a very detailed set of written laws and codes. - places more weight on the legislative and executive branches, allowing for the preferential treatment of special interest groups and more corruption

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases

Which of the following is an example of adverse selection in the market for health insurance?

The unhealthiest people are the most likely to apply for insurance

King Philip's War

1675 - A series of battles in New Hampshire between the colonists and the Wompanowogs, led by a chief known as King Philip. The war was started when the Massachusetts government tried to assert court jurisdiction over the local Indians. The colonists won with the help of the Mohawks, and this victory opened up additional Indian lands for expansion. - bloody conflict, resulted in the destruction of 12 New England frontier towns

Andrew Johnson

17th President of the United States, A Southerner form Tennessee, as V.P. when Lincoln was killed, he became president. He opposed radical Republicans who passed Reconstruction Acts over his veto. The first U.S. president to be impeached, he survived the Senate removal by only one vote. He was a very weak president. - Southern Democrat

Soil Conservation and Domestic Allotment Act

1936 - The second AAA appropriated funds for soil conservation paymnets to farmers who would remove land from production. - an effective piece of legislation against the dust bowl - educated farmers on better practices discovered by Bennett, finnell and others - govt subsides farmers that practiced these techniques * Today, economists believe that agricultural subsidies are inefficient and directly taxing the misuse of land may be a more efficient solution to a longer-run problem

Kansas-Nebraska Act

1854 - Created Nebraska and Kansas as states and gave the people in those territories the right to chose to be a free or slave state through popular sovereignty. - angered northerners

Dawes Act

1887 law that distributed reservation land to individual Native American owners - dissolving the legal entities of all tribes

Emergency Quota Act of 1921

1921 legislation that limited immigration to 3% of the people of their nationality living in the US in 1910 - immigration fell 40%

Refer to Table 3.6 above. Suppose a one-wage monopsony may sell its output for $2 each. The profit maximizing quantity of labor that a one-wage monopsony hires equals

6

Boston Tea Party

A 1773 protest against British taxes in which Boston colonists disguised as Mohawks dumped valuable tea into Boston Harbor.

Palmer Raids

A 1920 operation coordinated by Attorney General Mitchel Palmer in which federal marshals raided the homes of suspected radicals and the headquarters of radical organization in 32 cities - deporting workers decreases the labor supply, increasing non-deported workers wages - firms suffer from less competition in the labor force and higher wages

fractional reserve banking system

A banking system in which banks keep less than 100 percent of deposits as reserves - United States is on it

Erie Canal

A canal between the New York cities of Albany and Buffalo, completed in 1825. The canal, considered a marvel of the modern world at the time, allowed western farmers to ship surplus crops to sell in the North and allowed northern manufacturers to ship finished goods to sell in the West. - the most profitable canal - over first 10 years, the average annual rate of return was 8%

Dust Bowl (pg 251)

A drought in the 1930s that turned the Great Planes very dry. - difficult to measure the total cost of the Dust Bowl > indirect costs to others from the dust storms is not traceable > although govt assistance and workers reached as much as 1 billion - caused the supply of wheat to decrease, increasing wheat prices > total revenue to all wheat farmers rose from 1932-1936

Federal Housing Administration

A federal agency established (by the National Housing Act of 1934) in 1943 to increase home ownership by providing an insurance program to safeguard the lender against the risk of nonpayment. - prooted small laons to future homeowners and stimulated some building during the depression - Guaranteed mortgage loans of up to 30 years

Securities Exchange Act of 1934

A federal law dealing with securities regulation that established the Securities and Exchange Commission to regulate and oversee the securities industry. - regulated secondary trading of stocks - Created the Secutities Exchange Commission (SEC) - acted as a watchdog for insider trading and shady accounting practices

Teapot Dome Scandal

A government scandal involving a former United States Navy oil reserve in Wyoming that was secretly leased to a private oil company in 1921 - Secretary of the Interior Albert Fall had two out deposits put under his departments jurisdiction

Gettysburg

A large battle in the American Civil War, took place in southern Pennsylvania from July 1 to July 3, 1863. The battle is named after the town on the battlefield. Union General George G. Meade led an army of about 90,000 men to victory against General Robert E. Lee's Confederate army of about 75,000. Gettysburg is the war's most famous battle because of its large size, high cost in lives, location in a northern state, and for President Abraham Lincoln's Gettysburg Address. - a stragegic point for the north and south · lasted 3 days · 24,000 north and 28,000 south soldiers died · sealed the fate for the confederacy

National Origins Act of 1924

A law that severely restricted immigration by establishing a system of national quotas that blatantly discriminated against immigrants from southern and eastern Europe and virtually excluded Asians. The policy stayed in effect until the 1960s. - halted all immigration from Asia, and nearly all from Italy and poland - intension was to preserve the "ideal of American homogeneity" - took the number of immigrants from each country living in the US in 1890 and stated that immigration could not grow by more than 2% of these totals each year

Second New Deal (1935)

A new set of programs and reforms launched by FDR in 1935 - included additional legislation aimed to help farmers, labor unions, and lower income individuals - established Social Security

Compromise Tariff of 1833

A new tariff proposed by Henry Clay & John Calhoun that gradually lowered the tariff to the level of the tariff of 1816; avoided civil war & prolonged the union for another 30 years. - resulted from John C Calhoun threatening for SC to secede

Harlem Renaissance

A period in the 1920s when African-American achievements in art and music and literature flourished

Bleeding Kansas

A sequence of violent events involving abolitionists and pro-Slavery elements that took place in Kansas-Nebraska Territory. The dispute further strained the relations of the North and South, making civil war imminent.

Industrial Revolution

A series of improvements in industrial technology that transformed the process of manufacturing goods.

Hugh Bennett

A soil scientist in the 1920s and 1930s for the U.S. Department of Agriculture. He spoke about the danger of soil erosion. Became director of Soil Conservation Service in 1933

Nullification

A state's refusal to recognize an act of Congress that it considers unconstitutional

Revenue Act of 1926 pg 224

Act extended further benefits to high-income groups by lowering estate taxes and repealing the gift tax. - lowered top income tax rate from 46% to 25% but did not change the bottom rate - led to a fall in income revenue - felly 3.33%

Northwest Land Ordinance (1783, 1785, 1787)

Act of the confederation congress that provided for the survey, sale, and eventual division into states of the Northwest Territory. The 1787 act clarified the process by which territories could become states - laid out guidelines for privatizing western land and explained how territories could become states - govt priced land too high for most pioneers and small farmers, transportation costs were high, with few turnpikes (roads mostly funded by private investors) or canals

Neutrality Act of 1939

Act that allowed nations at war to buy goods and arms in the United States if they paid cash and carried the merchandise on their own ships - renewed the "cash and carry" clause

John Maynard Keynes disputed the Classical Theory in support of his General Theory, stating

Both A and C are correct. - A) the economy may not recover, by itself, after recession. - C) monetary policy may be ineffective in restoring the economy.

21st Amendment

Amendment which ended the Prohibition of alcohol in the US, repealing the 18th amendment - under Franklin Roosevelts administration

Francis Cabot Lowell

American industrialist who developed the Lowell system, a mill system that included looms that could both weave thread and spin cloth. He hired young women to live and work in his mill - vertically integrated all stages of cloth production under one roof

Robert Fulton

American inventor who designed the first commercially successful steamboat and the first steam warship (1765-1815) - built first steamboat, the Clermont - average life of a steamboat was 5 years, but they were so profitable investors would pay to repair or get new ones

Missouri Compromise of 1820

Allowed Missouri to enter the union as a slave state, Maine to enter the union as a free state, prohibited slavery north of latitude 36˚ 30' within the Louisiana Territory (1820) - temporarily resolved the issue of whether new states joined the Union as free or slave

trade deficit

An excess of imports over exports - they imported more in value than the exported

Mercantilism (1500s - mid 1700s)

An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought - a countries economic wealth is measured by the precious metals in its treasury - believed the worlds wealth was fixed, so they saw trade as a zero sum game * Short Run: increased production, increased employment, decreased unemployment * Long Run: not sustainable

Transportation Act of 1718

British parliamentary act that mandated the exile of convicted criminals to North America, mostly those who had committed property crimes such as theft - sold prisoners to the colonies as indentured servants

Removal Act of 1830

Congressional act that authorized the removal of all Native American tribes east of the Mississippi to the west. The Trail of Tears and other forced migrations caused the deaths of thousands. - passed by Andrew jackson

National Industrial Recovery Act of 1933 (NIRA)

Created the National Recovery Administration (NRA) and the Public Works Administration (PWA) 1) NRA - allowed firm managers to meet and set agreed upon minimum industry prices > Promoted labor unions - allowed cartels to reduce output and increase prices to increase profit > bc they produced less, the demand for labor was lower, increasing unemployment in short run > long run, lower labor demand ledd to falling wages but no effect on unemployment 2) PWA - increased federal spending on large scale public works projects - took many umemployed Americans and gave tehem 30-35 hour/week jobs in physical labor and construction jobs - spent over 6 billion in contracts to private firms during the Great Depression - Operated until 1943, when govt began allocating resources to WW2 production

bills of credit

Currency printed by the Continental Congress during the Revolutionary War; printing these bills in huge numbers and without any backing led to high inflation

Indentured Servitude (Video)

Demand for Labor: - Blacks become substitute for indentured servants (slavery increases) - Indentured servant demand decreases Supply for Labor: - voyage costs decrease - european incomes rising - decrease in supply for indentured servants

Neutrality Acts of 1935 and 1936

Designed to keep us out of this war. Congress says no selling arms to either side. President says that if people want to visit these countries they are on their own, no one will accompany you.

Treaty of Ghent (1814)

Ended the War of 1812. Did not address grievances that led to the war (stalemate for both sides).

First New Deal

Established to serve the "three Rs" Relief for the people out of work, Recovery for business and the economy as a whole, and Reform of American economic institutions

Yalta Conference (1945)

FDR, Churchill and Stalin met at Yalta. Russia agreed to declare war on Japan after the surrender of Germany and in return FDR and Churchill promised the USSR concession in Manchuria and the territories that it had lost in the Russo-Japanese War

Wagner Act (National Labor Relations Act) of 1935

Federal law that allowed labor unions to engage in collective bargaining. - added protections for labor unions and their ability to collectively bargain with firms and protected their right to strike - Also created the National Labor Relations Board (NLRB) to enforce unions rights > led to many sit down strikes in the late 1930s

Free Soil Party (1848)

Formed in 1847-1848, this political party was dedicated to opposing slavery in newly acquired territories such as Oregon and ceded Mexican territory. Its candidate in the 1848 election was former President Martin Van Buren. - Most members eventually become Republicans. - Party's founding demonstrates growing strength of the movement to keep new territory free from slavery.

Bonus Army

Group of WWI vets. that marched to D.C. in 1932 to demand the immediate payment of their goverment war bonuses in cash - hoover had general douglas MacArthur use 6 tanks and tear gas to clear the marchers

Jamestown, Virginia was the first colony to introduce the _________

Headright system - an arrangement that gave 50 acres of land to anyone who paid for a settlers passage to the town - plantation owners were given land for each slave they transported into the colonies

John Smith

Helped make colonization self-sustainable in the late 1600s because of his family-based colonization - increased investors expected benefit of funding therefore increasing demand for indentured servants

Tariff of 1828 (Tariff of Abominations)

In 1828, during President John Quincy Adams' term, Congress created a new tariff law which pleased northern manufacturers, but alienated southern planters - highest protective tariff until the Smoot-Hawley Tarriff increased rates on manufacturing goods up to 45% - helped northern manufacturing and hurt southern plantations

Before the Civil War, President __________ did little to stop southern secession from the Union, which increased the demand for slavery in southern states.

James Buchanan

Louisiana Purchase (1803)

Jefferson sent Monroe to Paris to purchase New Orleans; Monroe ended up spending $15 million, because he was able to get all of Louisiana, Jefferson conflicted about the purchase, since he didn't feel he had the authority to do so under the Constitution, but the deal was too good to pass up and provided more than enough land to fulfill his dream of an America populated with small farmers. - US nearly doubles its size

Refer to Figure 14.4 above. In the market for soldiers above, the government's demand for soldiers is D', and it chooses to pay a wage of WB, drafting the remaining solders. The all-voluntary force equals

LA

Navigation Acts

Laws that governed trade between England and its colonies. Colonists were required to ship certain products exclusively to England. These acts made colonists very angry because they were forbidden from trading with other countries. - series of acts starting in 1651 that restricted commerce between the colonies and england * made many colonial producers, consumers and merchants worse off

Revenue Act of 1924 (Mellon Tax Bill)

Lowered the top marginal tax rate from 58% to 46% and lowered the bottom rate from 4% to 2% - income tax revenue as a % of GDP increased by 4.26%, indicating that the US was on the right side of the gaffer curve - only major tax act in history where lower taxes were associated with higher income tax revenue, after accounting for base line growth

Marginal Revenue Product

Measures the value of output an additional worker produces

Which of the following best explains the cause of the Great Depression, as supported by economic data?

Monetarist explanation

Civilian Conservation Corps (CCC)

New Deal program that hired unemployed men to work on natural conservation projects - provided unskilled manual labor jobs relating to the conservation and development ot natural resources - employeed over 2.5 million part-time workers who labored for govt

Works Progress Administration of 1935

New Deal program that provided relief to the unemployed in fields such as theater, literature, entertainment, and art. One of the largest "alphabet" agencies. - replaced his federal Emergency Relief Administration of 1933 and was the largest and most ambitious New Deal agency created - employed millions of unskilled workers to carry out public wprks projects, which included the onsturctoin and public buildings and roads

During the first period of colonization into America, most indentured servants were

None of the above.

Higher tariffs imposed by the North during the Civil War, all else equal, caused short-run output to

None of the above.

Refer to Figure 3.4 above. Suppose the graph above depicts a one-wage monopsony after the Civil War, such as a textile mill in the South. The firm pays a wage equal to

None of the above.

Refer to Figure 5.4 above. Suppose the above graph is of Standard Oil in the late 1800s. Producer surplus equals

None of the above.

Refer to Table 3.6 above. What consumer surplus does a perfectly price discriminating monopsony gain from only its 4th worker?

None of the above.

The Panic of 1907 resulted in many bank runs. All else equal, these bank runs caused the short-run price level to

None of the above.

Refer to Figure 5.4 above. A one-price monopoly charges a price equal to

PA and produces QA units.

Antifederalists

Opponents of ratification of the Constitution and of a strong central government, generally.

Executive Order 9066 in 1942

Ordered by President Franklin Roosevelt in February, 1942. Declared that large military zones could be set up to exclude current residents who were believed to be a threat to security. - ordered many Japanese, German and Italian US citizens into internment camps > about 110,000 japanese

Sugar Act of 1764

Part of Prime Minister Grenville's revenue program, the act replaced the Molasses Act of 1733, and actually lowered the tax on sugar and molasses (which the New England colonies imported to make rum as part of the triangular trade) from 6 cents to 3 cents a barrel, but for the first time adopted provisions that would insure that the tax was strictly enforced; created the vice-admiralty courts; and made it illegal for the colonies to buy goods from non-British Caribbean colonies. - represents a shift in british policy towards to colonies, because it attempted to raise tax revenue rather than only regulate trade - taxes on sugar, wine and coffee * decreased sugar price sellers received, demand of labor to produce sugar fell, wages decreased, rum production decreased - greatly harmed middle colonies

Civil Rights Act of 1866

Passed by Congress on 9th April 1866 over the veto of President Andrew Johnson. The act declared that all persons born in the United States were now citizens, without regard to race, color, or previous condition.

Greenback Party

Political party devoted to improving the lives of laborers and raising inflation, reaching its high point in 1878 when it polled over a million votes and elected fourteen members of Congress. - (1874) supported the issuing of more greenbacks into circulatgion to inflate farm prices and lower farmers real debts - since most farmers had to repay a fixed numbest of dollars back each period, higher prices would have lowered the purchasing power of each dollar repaid - taking greenbacks out of circulation inhibited short run economic growth, creating deflationary pressure and putting a downward pressure on output - issuing greenbacks would have promoted short run economic growth

Know-Nothing Party

Political party of the 1850s that was anti-Catholic and anti-immigrant - got its name from the party members being so secretive and denying knowing anything

Who competed for resources in the new world

Portuguese, French, and Dutch

Mexican-American War (1846-1848)

President Polk provoked this war by ordering U.S. troops into disputed territory between Texas and Mexico. The U.S. won the war and vastly increased its territory.

Nicholas Biddle

President of the Second Bank of the United States; he struggled to keep the bank functioning when President Jackson tried to destroy it. - forced to call in loans to keep 2nd Bank operating --> caused fall in money supply putting recessionary pressure on economy * alone this would have caused prices to fall and unemployment to rise * local and state banks could expand credit by moving specie to other banks - this expansionary move combatted recessionary pressure **overall effect on the economy of Jacksons attempt to destroy the 2nd Bank is uncertain

GI Bill of Rights Act of 1944

Provided GI's with free college education, and this education helped smooth the transition of soldiers into the peacetime labor force

Federal Emergency Relief Administration of 1933

Provided grants to states for direct relief to the needy - provided large amoiunts of federal support to local relief agencies through grants and loan states - Focused on smaller, local projects unlike PWA

Federal Land Policy and Management Act (1976)

Provides for protection of the scenic, scientific, historic and ecologic values of federal lands and for public involvement in their management. - ended homesteading, except in Alaska - homesteading in Alaska ended in 1986

19th Amendment (1920)

Ratified on August 18, 1920 (drafted by Susan B. Anthony and Elizabeth Cady Stanton), prohibits any United States citizen from being denied the right to vote on the basis of sex. The Constitution allows the states to determine the qualifications for voting, and until the 1910's most states disenfranchised women. The amendment was the culmination of the women's suffrage movement in the U.S.

Gold Reserve Act of 1934

Required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury. - officially takes US of the gold standard - penalty for owning gold was a $10,000 fine and up to 10 years in prison - forced the US dollar to be the median of exchange

Herbert Hoover (1929-1933)

Republican candidate who assumed the presidency in March 1929 promising the American people prosperity and attempted to first deal with the Depression by trying to restore public faith in the community.

Royal Proclamation of 1763

Royal proclamation setting the boundary known as the Proclamation Line. - restricted migration west of the App Mountains, since England wanted to mitigate its military expenses protecting the colonies

Adam Smith

Scottish economist who wrote the Wealth of Nations a precursor to modern Capitalism. - the first classical economist who harshly criticized mercantilism - Supported Say's Law - Classical economists also believed that wealth was measured by production, which was determined by real factors

Andrew Mellon

Secretary of Treasury under President Harding, Coolidge and Hoover, who instituted a Republican policy of reduced government spending, lower taxes to the wealthy and higher tariffs - 3rd richest person at the time

Sugar Tax of 1764 (Video)

Sugar: Sugar Tax increases excise tax/unit Consumer Surplus: decrease Producer Surplus: Decrease Govt Rev: ? Dead Weight Loss: Increase Labor Mkt for Sugar: Buyer Price: Increase Seller Price: Decrease Demand for workers: Decrease Worker Wages: Decrease Revenue from each worker: Lower Rum: Supply of rum: Decrease Marginal Cost of rum: higher Price of Rum: Higher Consumer Surplus: decrease Producer Surplus: ?

Advertising Age

Term first used to describe America's consumer culture of the 1920s, when advertising began to influence the choices of purchasers. - many firms began to mass-advertise through the radio, newspapers and magazines - standard of living greatly increased for most individuals

Which of the following temporarily resolved the issue of whether states joined the Union as free or slave?

The Compromise of 1820

Open market purchases

The Fed's purchase of government bonds from the private sector

Boston Massacre (1770)

The colonials hated the British soldiers in the colonies because the worked for very low wages and took jobs away from colonists. On March 4, 1770, a group of colonials started throwing rocks and snowballs at some British soldiers; the soldiers panicked and fired their muskets, killing a few colonials. This outraged the colonies and increased anti-British sentiment.

Specie Circular (1836)

The Specie Circular, issued by President Jackson July 11, 1836, was meant to stop land speculation caused by States printing paper money without proper specie (gold or silver) backing it. The Circular required that the purchase of public lands be paid for in specie. It stopped the land speculation and the sale of public lands went down sharply. The panic of 1837 followed.

Indian Massacre of 1622

The attack on the colonists of Jamestown, which claimed 350 lives. this was an attack by Opechanennough (brother/successor of Powhatan) in attempt to stop the colonists from taking land. This led to the stereotype of Indians as savages and to be eliminated as soon as possible. - resulted in nearly 1/4th of colonists dying

Securities Act of 1933

The first major federal law regulating the securities industry. It requires firms issuing new stock in a public offering to file a registration statement with the SEC. - required firms to disclose balance sheets, profit and loss statements and compensations to officers within corporations - Required independent auditors to verify these reports

Tariff Act of 1789

The first national tariff was designed primarily to raise revenue and not to protect home industries - allowed Hamilton to secure a tariff of about 8% on imports, also protecting infant industries - Tariffs initially funded 90% of the federal govt revenue

Discount rate

The interest rate on the loans that the Fed makes to banks - easier for banks to borrow and provide credit to growing businesses

Lend-Lease Act (1941)

The program under which the US supplied the United Kingdom, the Soviet Union, China, France and other Allied nations with vast amounts of war material between 1941 and 1945. - effectively ended US Neutrality when it allowed US to provide England and other allies with arms and loans

Shay's Rebellion (1786)

This MA conflict caused criticism of the Articles of Confederation; weak govt; increased calls for a Constitutional Convention to revise the Articles - deflation from trade deficits caused the prices of agr goods to fall unexpextly - many farmers went into debt

Currency Act of 1764

This act applied to all of the colonies. It banned the production of paper money in the colonies in an effort to combat the inflation caused by Virginia's decision to get itself out of debt by issuing more paper money. - prohibited printing any new bills of credit or reissuing existing ones, restricting the money supply

Embargo Act of 1807

This act issued by Jefferson forbade American trading ships from leaving the U.S. It was meant to force Britain and France to change their policies towards neutral vessels by depriving them of American trade. It was difficult to enforce because it was opposed by merchants and everyone else whose livelihood depended upon international trade. It also hurt the national economy, so it was replaced by the Non-Intercourse Act. - Created in response to britain and france seizing neutral US ships entering enemy ports - Harmed producers and merchants bc they could not trade at the higher world price -US Consumers benefited from lower prices but there was a net welfare loss bc the losses to producers outweighed the gains to consumers - At national level, banning exports decreased national production - As production and prices fell, firms laid off workers and unemployment rose

Second Bank of the United States

This institution was chartered in 1816 under President Madison and became a depository for federal funds and a creditor for (loaning money to) state banks. It became unpopular after being blamed for the panic of 1819, and suspicion of corruption and mismanagement haunted it until its charter expired in 1836. Jackson fought against this institution throughout his presidency, proclaiming it to be an unconstitutional extension of the federal government and a tool that rich capitalists used to corrupt American society. - Fed govt funded about 20% - individuals, firms, and foreigners funded about 80% - chartered to help finance debt gained from the War of 1812

Tariff of 1816

This protective tariff helped American industry by raising the prices of British manufactured goods, which were often cheaper and of higher quality than those produced in the U.S. - raised tariff rates to nearly 22% - encouraged US production, interstate commerce, and provide revenue to the fed govt - encouraged higher short run production - Domestic workers benefited - Demand for labor increased, leading to higher worker wages - US consumers of textiles were worse off - was economically inefficient - tariffs result in net welfare loss to society - tariffs shield industries from competition - tariffs eventually harm exporting industries within a country

Fordney-McCumber Tariff (1922)

This tariff rose the rates on imported goods in the hopes that domestic manufacturing would prosper. This prevented foreign trade, which hampered the economy since Europe could not pay its debts if it could not trade.

Treaty of Paris 1783

This treaty ended the Revolutionary War, recognized the independence of the American colonies, and granted the colonies the territory from the southern border of Canada to the northern border of Florida, and from the Atlantic coast to the Mississippi River

Who believed that technological advances only temporarily increased society's welfare, and eventually population growth would explode leading to starvation and death?

Thomas Robert Malthus

Total Cost of Civil War

Total cost was about 6.6 billion - spread out equally between north and south - includes govt expentatures, loss of lives, and property damage

War of 1812 (1812-1815)

US v Britain:fought over trade restrictions caused by British-French war; the impressment of American sailors, British support of American Indian tribes against American expansion, - Burning of Washington: in 1814 British burned down the white house - Demo-Rep support shifted towards an even stronger central govt - War benefited US textile producers bc they did not have to compete with englands low-priced textile exports - this stimulated US textile production - of course US consumers did not like the higher prices

Panic of 1837

When Jackson was president, many state banks received government money that had been withdrawn from the Bank of the U.S. These banks issued paper money and financed wild speculation, especially in federal lands. Jackson issued the Specie Circular to force the payment for federal lands with gold or silver. Many state banks collapsed as a result. A panic ensued (1837). Bank of the U.S. failed, cotton prices fell, businesses went bankrupt, and there was widespread unemployment and distress. - Jacksons fault and worse depression of the century

Stamp Tax of 1765

Widely unpopular tax on an array of paper goods, repealed in 1766 after mass protests erupted across the colonies. Colonists developed the principle of "no taxation without representation" which questioned Parliament's authority over the colonies and laid the foundation for future revolutionary claims.

Phillips curve

a curve that shows the short-run trade-off between inflation and unemployment - as inflation rose, unemployment fell

Civil Rights Act of 1968

a law that banned discrimination in housing

Stagflation

a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation) - situation with rising prices but falling output - common occurrence during any war fought on ones own soil

To curb late-1920s speculation in the stock market, the Federal Reserve pursued contractionary monetary policy. Before interest rates adjusted in the short run,

a shortage of saving existed, and interest rates then rose.

In a competitive labor market, if the wage is lower than the equilibrium wage,

a shortage of workers exists, and the wage must rise.

zero-sum game

a situation in which an economic gain by one country results in an economic loss by another

Budget Surplus

an excess of tax revenue over government spending - occurs when the govt spends less than it receives in tax revenue - the difference goes into the financial system, making more funds available for private firms to borrow - put downward pressure on interest rates, increasing investment

Refer to Figure 3.4 above. Before the Civil War, plantation owners earned what area in economic welfare?

area "a + b + c + d + e + f + g + h + i".

Refer to Figure 1.1 above. Consumer surplus in the market above, with no tax, equals

area "a + b + c"

Refer to Figure 14.1 Above. In the market above, the government imposes a subsidy of PS minus PB. Producer surplus after the subsidy equals

area "b + c + e + i"

Refer to Figure 9.1 above. A tariff in the above market results in a decrease of consumer surplus of

area "e + f + g + h + i"

Refer to Figure 1.1 above. Producer surplus in the market above, with a per unit tax of P1 minus P3, equals

area "f"

Refer to Figure 9.1 above. A tariff in the above market results in tariff revenue to the government of

area "g + h"

Refer to Figure 4.2 above. The world price equals PC, and this country trades with the rest of the world. Domestic producer surplus equals

area "g", and this country imports the good.

First Bank of the United States

bank set up by Hamilton in 1791 to make loans to the fed govt, companies and individuals; act as a lender of last resort; issue bank notes to increase the money supply; acted as a tax collecting agency; and transferred money between countries - Federal govt funded about 20% of its capital - Ironically British owned most of the stock

Higher Education Facilities Act of 1963 and Higher Education Act of 1965

both increased federal funds to universities

In the long run, technological advances that increase worker productivity cause the demand for labor to

change uncertainly.

Second Revenue Act of 1940

created an excess profits tax of 50% with the intent of recapturing any "excess profits" that corporations earned because of the war -

The Federal Reserve

created in 1913, it initially took a hands off approach - allowed the money supply to grow and credit to be extended through lowering the discount rate, but it did not deliberately pursue expansionary monetary policy to lower unemployment

Home Owners Loan Corporation Act of 1933

created the Home Owner's Loan Corporation (HOLC) > Refinanced existing home mortgages in the threat of default to prevent future forecloses - HOLC generally offered lower interest rates and extended loan durations by about 15 years

After World War II, Sam the Soldier returns home and takes his job back from Rosie the Riveter. She continues to be available for and looking for work. The labor force for women

does not change.

John D. Rockefeller and Andrew Carnegie faced __________ demand for their goods. Therefore, they had __________ incentive to decrease their marginal costs of production.

elastic / great

Had the People's Party successfully adopted a silver standard, farmers would have

enjoyed short-run economic relief.

ticket rationing

entitled the holders of government-issued tickets to purchase limited quantities of goods at ceiling prices - red-point system - where people used a limited number of "point" for the opportunity to purchase fats and meats and the govt periodically controlled point prices - blue-point system - used for process foods, such as soda, snacks, and canned fruits and vegetables * these rationing systems did not alleviate shortages

In the market for loans, suppose that the real interest rate is lower than the equilibrium real interest rate. Saving is

equal to investment, and the real interest rate will rise.

Capper-Volstead Act of 1922

gave farmers protection from anti-trust law and allowed them to cooperatively market - was ultimately worthless bc farmers operate in a perfectly competitive market

Southern Colonies

had fertile land and ling growing season - produced tobacco, indigo, rice and wheat

Middle Colonies

had fertile land but short growing season - produced wheat, livestock, b per and rum

Great Plains Shelterbelt Project

planted trees from Canada to Texas as a windshield to block dust storms - while this did not prevent soil erosion or stop wind, planting kudzu did > total costs to control wilding spreading kudzu is about 6 million a year

When the federal government issued more War Bonds during WWII, the Federal Reserve conducted open market

purchases, lowering short-run nominal interest rates.

From 1818 to 1819, the Second Bank of the United States

pursued contractionary monetary policy, which led to the Panic of 1819.

Revenue Act of 1934

raised taxes on the rich - top marginal tax rate remained at 63%, but the act lowered upper-level income tax brackets so that a larger fraction of income was taxed at higher rates - increased tax rates alone did reduce aggregate demand, causing absolute reductions in output and increases in unemployment - govt has a 19.67% increase in income tax revenue

Compensated emancipation

the federal govt buying slaves freedoms from plantation owners - cost of compensatred emancipation was so high it caused widespread opposition - would have cost about 2.7 billion - national debt would have increased to 82%

Pareto optimal

when one group or individual connot be made better off without making another froup or individual worse off - Hicks paradox - irratrionality of strikes

The Palmer Raids in the early 1920s decreased the supply for labor. All else the same, these raids caused U.S. firms to be

worse off, and workers who were not deported to be better off.

Funding the War: South

· 1) Taxes & Tariffs - 10% · 2) Bonds - 30% · 3) Printing Money - 60%

Funding the War: North

· 1) Taxes & Tariffs - 25% · 2) Bonds - 57% · 3) Printing Money - 18%

Goals of the People's Party (Populist)

· Goals of the Peoples Party: -Stop "exploitive" interest rates - Stop railroads from discriminatory rates > Interstate commerce Commission (ICC) (1887) was ineffective at regulating these rates - Replace property taxes with progressive income tax - Create regional sub-treasury to store farmers crips until prices rose, providing farmers with loans in the mean time - Allow free coinage of silver/ increase money supply > would cause fewer farmers to default on loans