Econ History Quiz 1 MCQ Slides

Q: What are the three parts of the Trilemma?

A:

1. Fixed exchange rates

2. Independent monetary policy

3. Free capital mobility

Q: How many parts of the Trilemma can a country have at once?

A: Only 2 of the 3.

Q: Gold Standard combination?

A:

• Fixed exchange rates

• Free capital mobility

• No monetary independence

Q: Bretton Woods combination?

A:

• Fixed exchange rates

• Monetary independence

• Capital controls

Q: Modern system combination?

A:

• Monetary independence

• Capital mobility

• Floating exchange rates

Q: What does a low Feldstein-Horioka coefficient indicate?

A: High international capital mobility.

Q: What does a high Feldstein-Horioka coefficient indicate?

A: Low international capital mobility.

Q: What is Covered Interest Parity (CIP)?

A: A condition where arbitrage prevents risk-free profits from interest-rate differences across countries.

Q: CIP is what type of measure of globalization?

A: Price-based measure.

Q: What does market integration accomplish?

A:

• Better allocation of capital

• Risk sharing

• Higher welfare

Q: What percentage of GDP did Britain export as capital before WWI?

A: Roughly 6%.

Q: Major destinations for British capital?

A:

• United States

• Canada

• Australia

• New Zealand

Q: One-sentence summary of Bordo, Eichengreen & Kim?

A: Pre-1914 globalization was highly financially integrated, not fundamentally different from modern globalization.

Q: One-sentence summary of Clemens & Williamson?

A: British capital followed productivity-enhancing fundamentals, not primarily empire or market failures.

Q: One-sentence summary of Chabot & Kurz?

A: British overseas investment was largely rational because international diversification improved risk-adjusted returns.