Econ 4550 Final Updated Actual Questions And Correct Answers

ECON 4550 FINAL UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS

Question:
1. What were the problems with the Articles of Confederation?
Answer:
Required unanimity to make decisions, states maintained most rights, the control of trade policy was not
delegated to congress

Question:
2. Which region recovered slowest from the war and why?
Answer:
Southern states recovered slowly as they lost rice bounty supplied by Great Britain, indigo production fell,
and Carolina planters struggled

Question:
3. Why did New England struggle to recover from the war, and how did they overcome this?
Answer:
New England struggled to replace the demand for cod, whale oil, and shipping that previously had come
from the British West Indies, but the French West Indies, Portugal, and Spain provided some substitute
markets and some activity was redirected to trade with the South

Question:
4. Which region recovered quickest from the war and why?
Answer:
Mid Atlantic states recovered the quickest by substituting a growing local market for the loss of some
foreign markets and increasing the degree of manufacturing, some of which is shipped to the South

Question:
5. Which region was hit hardest economically by the war?
Answer:
the South, especially due to the drop in exports

Question:
6. How well did the continental dollar work?
Answer:
Fulfilled role for war financing (up to 1779 paid for 77% of congressional expenditures) After 1779 value
destroyed by long war and poor policy choices, leading to lack of credibility Circulation officially ended in
1790

Question:
7. What were issues with the use of the continental dollar?
Answer:
Different value of the dollar depending on redemption rate, bizarre denomination structure, the
continuation of states creating their own paper moneys

, Question:
8. Why was there a money problem in the colonies?
Answer:
There was an absence of reliable and adequate means of payment and few circulating gold and silver coins

Question:
9. Why was the Declaration of Independence important for American borrowing?
Answer:
It convinced the French and Dutch bankers that the colonies were committed to independence

Question:
10. Where did the US get foreign aid and loans from?
Answer:
French and Spanish help starting in 1775 including money and weapons, Dutch loan in 1782

Question:
11. How did the free rider problem work during the war?
Answer:
All states benefit from winning the war but if the other 12 states pay resources and my state withholds, I
benefit a lot so there is incentive to underpay my share. The problem is symmetrical so everyone
underpays

Question:
12. Why was the legitimacy of congressional fiscal and monetary policy unclear?
Answer:
Congress was an ad hoc body Articles of Confederation were not adopted until 1777 and not ratified until
1781

Question:
13. What were the immediate economic consequences of the war?
Answer:
1774-1781 the economy declined 15+%, contraction continued through the 1780s

Question:
14. What was the Commissioners of Customs Act?
Answer:
Established a customs board located in the colonies to increase tax revenue and reduce smuggling. Conflict
over its application eventually leads to the occupation of Boston and the Boston Massacre

Question:
15. How did the strict enforcement on molasses despite the lowered tax impact the colonies?
Answer:
Severely impacted the New England rum industry, reduced trade with the Azores, Canary Islands, and
French West Indies, and reduced sources of revenue by which the colonies could purchase necessary
British manufactured goods