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Final Exam Study Questions
The final exam will consist of three questions, each worth 10 points. The first two questions will test your comprehension of the main arguments and themes from the readings. The third question will test your ability to analyze and interpret some piece of historical data which we have already looked at extensively in class. To help you study for the midterm, I have included a list of practice questions below.
These questions give you a sense of the level of generality I am aiming for (nothing too specific from the readings, just looking for your understanding of the main topics, arguments, and debates) as well as the breadth of possible topics (anything since the October 24th lecture up until the last day of class). There is no “right answer” to any of these questions, just focus on giving a clear answer to the question or topic, and bringing in details as you see fit.
I am open to discussing these questions during office hours, by email, or in my office at other times by appointment. I will also leave time during Tuesday’s class (November 26th) for you to ask questions.
1. The significance of monetary stimulus in a depressed economy has been hotly debated among economists. Give one example of an argument for monetary stimulus in a recession or depression. Then, give one example of an argument against monetary stimulus in a recession or depression. According to Christina Romer, was fiscal or monetary stimulus more important for getting the economy out of the Great Depression? Briefly describe how she comes to her conclusion. Limit your entire response to 3 or 4 paragraphs.
2. A common identification strategy we have encountered in class involves finding the“treatment effect” of a given policy or law. This involves analyzing changes in a variable in two different environments: one which saw no policy/law change, and one which did see a policy/law change. You then compare the change in the variable in each environment, to determine the overall “treatment effect” of a policy or law. This is appropriately called a “difference-indifferences” identification strategy. Explain in 3 or 4 paragraphs how Claudia Golden uses this strategy to determine the effects of maximum hours legislation on women workers’ hours and employment in the late-19th and early-20th centuries.
3. What is the theory of American Exceptionalism in the context of the labor movement? Critics of American Exceptionalism have argued that there are political, legal, and economic forces that have helped shape worker collective bargaining strategy over time. Identify two such forces and explain their role in shaping the American labor movement. Be sure to explain how the two forces aim to criticize proponents of the American Exceptionalism thesis. Limit your entire response to 3 or 4 paragraphs.
4. An economy in a liquidity trap (such as Japan in the 1990s, the U.S. in the 1930s, or even the U.S. today) may require negative real interest rates in order to boost consumption and investment and, therefore, aggregate demand. The argument here is that a negative real interest rate would “penalize” consumers and businesses for saving, encouraging them to spend today because their holdings (in real terms) will be worth less tomorrow. How could a monetary authority achieve a negative real interest rate? After describing how that policy measure would work, list and explain one shortcoming (i.e., criticism) of the above logic.
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5. According to Table 1 below, which gives statistics on average strike outcomes by legal environment between 1881 and 1894 (from Currie and Ferrie 2000, “Table 3”), evaluate and explain the effects of the five different legal and political environments on the average percentage change in hours before and after a strike.
Some historians and economists have argued that maximum hours laws, like minimum wage laws, might lower strike incidence because firms will hire fewer but more-loyal and higherquality workers. Do the findings in Table 1 support this hypothesis? Explain your answer.
6. You decide to show your friend, who is a statistics major, Figure 1 below. This table shows the relationship between real GDP growth and the Debt-GDP ratio in a set of country-year data points between 1946 and 2009 (figure 4 from Herndon, Ash, and Pollin 2013). You tell him that this figure demonstrates the need for countries currently experiencing low growth to cut spending if they want to see a recovery out of their slump. Describe how you come to such a conclusion from your visual analysis of the graph. Then, list and explain one causal argument which you can rely on (i.e., how exactly is the act of cutting spending supposed to lead to higher growth?) to make your argument.
You friend then replies that the graph you showed him only shows correlation, and not causation.
He says that the causal relationship could just as easily go in the other direction – from low growth to higher debt-GDP ratios. List and explain one argument which your friend may reasonably rely upon to make this claim.
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