Deck 12: The Financial System and the International Economy

Question 1

During the antebellum period,the U.S.used more economic output and resources than were domestically available during expansions and less during contractions.International trade ?assisted during these cyclical times.

Answer 1

True

Question 2

A trade deficit can produce inflation when a country and its trading partners are on the gold standard or a bi-metallic system.

Answer 2

True

Question 3

Under the U.S.Constitution,each state gave up its right to issue money,borrow,levy taxes and regulate the value of money on behalf of national efforts.

Answer 3

True

Question 4

The Second Bank of the United States was deemed unconstitutional and,therefore,its charter was not renewed.

Question 5

High differentials in interest rates suggest that the financial markets of New England,the Middle Atlantic and the South were not integrated with those of New York City.

Question 6

Which of the following was NOT a reason given for opposing the renewal of the charters of the Banks of the United States?

A) The Banks of the United States made too many bad loans.
B) The Banks of the United States were unconstitutional.
C) The Banks of the United States hindered the development of private banks.
D) The Banks of the United States were owned, in part, by foreign investors.

Question 7

The Mint Act of 1792 failed to provide for a stable domestic hard currency for the U.S.because

A) the supply of gold and silver was inadequate.
B) the federal government failed to make the coins legal tender.
C) gold was undervalued, while silver was exported.
D) the notes of the U.S. government were not accepted by the population because of their ?low value, while the government had no gold to offer.

Question 8

State banks failed to find a way to print money under the Constitution.

Question 9

The Mint Act of 1792,following the ideas of Thomas Jefferson and Robert Morris,set the U.S.up as

A) a silver standard country.
B) a paper-money country.
C) a gold-standard country.
D) a bimetallic country.

Question 10

According to the quantity theory of money,inflation results when excessive paper money is in circulation.

Question 11

The struggles and controversies over federal and state powers led to the demise of both the First and Second Bank of the United States.

Question 12

The 1819 panic was caused by the Second Bank of the United States,which called on the state banks to redeem their notes in order to acquire $4 million in specie to pay the borrowing that had been undertaken in Europe in 1803 to finance the Louisiana Purchase.

Question 13

Which of the following was NOT a function of the First and Second Banks of the United States?

A) Handling government finances
B) Promoting growth of state banks
C) Helping establish uniform paper currency in the U.S.
D) Keeping state banks in line by presenting their notes

Question 14

The financial chaos of the antebellum period clearly impeded economic growth and development?in the long run.

Question 15

As cities grew and markets developed,life,fire and death insurance companies emerged to manage risks and help groups of individuals during disasters.

Question 16

The Second Bank of the United States lost its charter,in part,because Andrew Jackson effectively argued to the voting members of Congress that the "central" bank was a monopoly and largely influenced by the corrupt and fraudulent behavior of a wealthy minority and foreign investors.

Question 17

Under the Articles of Confederation,the Continental Congress permitted each state to issue paper money and borrow on their own to finance expenses related to the American Revolution.

Question 18

Monopolist fears that central banks would unfairly compete with all other profit-maximizing banks contributed to the demise of the First and Second Banks of the U.S.

Question 19

The number of private state banks decreased after the First Bank of the United States lost its charter.

Question 20

Which/who of the following was NOT an opponent to rechartering either the First or the Second Banks of the United States?

A) Andrew Jackson
B) Private banks
C) Nicholas Biddle
D) Rural interests

Question 21

Money serves the following function(s):

A) Medium of exchange
B) Store of value
C) Unit of account
D) All of the above

Question 22

During the antebellum period,most international payments were made by

A) shipping specie.
B) bills of exchange.
C) credit extended by private banks in the U.S.
D) all of the above.

Question 23

International trade in the U.S.during the antebellum period

A) benefited the Northern economy more than the Southern economy.
B) benefited England significantly more than the U.S.
C) played an important part in the growth and expansion of the Southern economy.
D) occurred as described in all of the above.

Question 24

All of the following are true of the gold standard except

A) It requires international trading partners to strictly accept gold payments for imports and exports
B) It supported stable and fixed exchange rates throughout most of the 19th century
C) It encouraged international trade
D) It integrated the U.S. monetary system into the world market

Question 25

Business cycles are best categorized as

A) fluctuations in the production and employment levels in the business sector of the economy.
B) major upswings and downturns in most sectors of the economy.
C) variations in international trade.
D) all of the above.

Question 26

During the international crises of 1837 and 1857,

A) the U.S. and England were connected financially.
B) the British were pursuing heavy internal improvements.
C) the U.S. was in the midst of heavy industrial expansion.
D) all of the above were true.

Question 27

Early nineteenth century banks primarily

A) enabled small savers to buy shares in a diversified portfolio of investments.
B) accepted and managed checkable deposits.
C) provided a broad range of financial services.
D) relied on a federal safety fund in times of well spread crisis.

Question 28

Under the new Constitution in 1789,the states gained the sovereign power to

A) levy taxes.
B) power and issue money.
C) "regulate" the value of money.
D) create corporations by special franchise.

Question 29

On the gold standard,a trade deficit in the U.S.impacted the economy by producing

A) a gain of specie.
B) a tight supply of money.
C) low interest rates.
D) deflation.

Question 30

Inflation results

A) when the price of one good or service increases.
B) when too much money is chasing too few goods.
C) when prices, on average, decrease across the economy.
D) when banks decrease lending.

Question 31

Explain the pros and cons of using paper money as opposed to specie,and the different techniques used by banks and governments to ensure paper money was accepted for use.

Question 32

Intermediation entities include which of the following?

A) Life and fire insurance companies
B) Stock exchanges
C) Mutual saving banks
D) All of the above

Question 33

Before the Civil War (1861-1865),the U.S.credit system made capital investments possible and fueled overall economic growth and development across many sectors.This system was supported heavily by whom?

A) The British
B) The North
C) The South
D) None of the above

Question 34

Unlike the Federal Reserve Bank of today,the First and Second Banks

A) could create corporations by special franchise.
B) were generally supported by the rest of the banking community.
C) were direct competitors with private business.
D) provided a federal safety fund in times of well banking crisis.

Question 35

An economy that grows in world interdependence experiences

A) growing trade on the basis of comparative advantage.
B) more vulnerability to the business cycles of trading partners.
C) wealth accumulation.
D) all of the above.

Question 36

Fractional reserve banking

A) destroys money.
B) requires banks to engage in 100 percent of total banking activities.
C) allows banks to create money while requiring them only to hold a fraction of money.
D) all of the above.

Question 37

During the antebellum period,the South exported more to England than it imported.This Southern trade surplus with England benefited whom?

A) The South
B) The North
C) England
D) All of the above

Question 38

Between 1790 and 1860,wholesale prices charged by producers of commodities

A) grew steadily over the period.
B) declined steadily.
C) exhibited wild variations but increased, on average.
D) exhibited wild variations but declined, on average.

Question 39

From 1789 to 1838,state banks

A) served as financial intermediations and paid out paper money to borrowers.
B) were corporations.
C) engaged in agricultural activities.
D) established demand deposits against which checks could be written by the borrower.

Question 40

In the Free Banking Era (the period of no central bank),

A) anyone could form a bank if they met the requirements.
B) banks were required to offer free financial services.
C) the federal government rescinded its tax on bank notes.
D) states rescinded their taxes on bank notes.

Question 41

Discuss the movement during this period of U.S.history to regulated banking through the public sector and through the private sector.

Question 42

Describe the key changes in the financial system of the antebellum economy.

Question 43

Define the business cycle.Describe the impact of U.S.economic expansions and contractions on national output,income,prices,interest rates,exports,imports and balance of trade during the pre-Civil War years.

Question 44

Discuss the arguments made in the United States for and against having a national bank,and identify the functions of U.S.central banks for the period of 1790 to 1860.

Question 45

Define the gold standard and identify its economic roles.

Question 46

Explain why the fractional reserve banking can be considered economic leveraging.

Question 47

Illustrate the "free rider" problem as it applies to fire insurance in densely populated residential areas.Explain why this problem may lead municipalities to provide fire fighting services.

Question 48

What determined the supply of money and the deposit multi?plier in the pre-Civil War years?

Question 49

Discuss the links among money,specialization and capital accumulation.

Question 50

Discuss the role of interregional and international trade in the development of the Northern and Southern economies from 1790 to 1860.

Question 51

Discuss the risks of using paper money to provide an adequate supply of money for the economy.Describe how a central bank,government regulation or coordinated action by banks can help reduce these risks.Describe the concerns of private citizens about paper money.How did local governments,state governments,federally-chartered banks,state-chartered banks and the Bank of England attempt to maintain the stability of paper money at different times from 1700 to 1860?