Economics 115: Fall 2009: First Midterm Exam

Answers to no more than two significant figures. No calculators allowed.

PART 1 (25 MINUTES): Identifications

For each of the ten events, tell us (a) when it happened (within a ten year window) and (b) what its relevance is to a course in twentieth century economic history:

1. Launching of first Five Year Plan in the Soviet Union
2. Wall Street stock market crash; start of the Great Depression
3. Gandhi's “Salt March”
4. “The End of the Beginning”: Battles of Midway, Guadalcanal, El Alamein, “Operation Torch”, and—most of all--”Operation Uranus”: Stalingrad
5. George Marshall proposes the “Marshall Plan”
6. Treaty of Rome creates the European Economic Community of “the six”
7. The “Southern Expedition” of Deng Xiaoping
8. Margaret Thatcher becomes Prime Minister of Great Britain
9. William Jennings Bryan [D] loses U.S. election to William McKinley [R]
10. Start of Mexican Revolution

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PART 2 (25 MINUTES): Short Answers

Write a paragraph or two about the importance of each of the following five economic forces in understanding the economic history of the world before 1914:

1. Malthusian population pressure
2. Falling trans-oceanic transportation costs
3. The abundance of very cheap easily mined coal near navigable waterways in Great Britain
4. European nationalism
5. Increasing income inequality

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No calculators allowed, You won’t need them. All you will need is simple arithmetic (the ability to multiply things by two, and to divide) and the rule of 72—the fact that a quantity growing at 1% per year doubles in 72 years, a quantity growing at 2% per year doubles in 36 years, a quantity growing at 0.5% per year doubles in 144 years, et cetera, a quantity growing at 1% per year grows by 41.41% in 36 years, etc…

PART 3 (25 MINUTES): Calculations

Consider the 144 years between 1866 and 2010…

1. World population grew from about 1.1 billion to 6.4 billion. About how many doublings did population undergo? What is the average growth rate of world population over those 144 years?
2. World total real GDP (on one somewhat arbitrary set of assumptions, at least) grew from $875 billion of today’s dollars in 1866 to $56 trillion of today’s dollars today. What was the average growth rate of world total real GDP over those 144 years?
3. If world total real GDP growth continues to grow at its average 1866-2010 rate, what will world total real GDP (in today’s dollars) be in 2155? Do you think this is possible? Reasonable? Absurd? Why?
4. By contrast, total world GDP (on one somewhat arbitrary set of assumptions, at least) grew from $437.5 billion of today’s dollars in 1794 to $875 billion of today’s dollars in 1866. Suppose total world real GDP growth had continued at its 1794-1866 pace from 1866-2010. What would total world real GDP be today?