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Test Bank for American Economic History Eighth Edition

PART 1 THE COLONIAL PERIOD, 1607–1783

Chapter 1 Overseas Empire 

True/False

Read each statement carefully. Identify whether it is true or false using the economic historian’s way of thinking. 1. European agricultural practices perfectly served the colonists farming in the New World. Answer:

False

2. Although most slaves came to the colonies before 1776, the majority of other types of labor came to North America voluntarily. Answer:

True

3. The children of indentured females were not the property of the master or owner of the indentured servant. This was an important difference between indentured servants and slaves. Answer:

True

4. Indentured servants were white colonists who sold themselves into slavery when their farms in America failed. Answer:

False

5. The British Crown was the only political, social, cultural and economic influence on the colonization of North America. Answer:

False

6. Taxes impose a cost on letting land remain idle. Answer:

True

7. Mercantilism followed feudalism. Unlike feudalism, mercantilism did not support any form of a strong central government or system of nation states. Answer:

False

Hughes/Cain • American Economic History, Eighth Edition

8. Adam Smith (1776) claimed that less governmental regulation, not more, would provide incentives for individuals to allocate resources efficiently, specialize and trade. Specialization and trade would generate wealth and result in economic growth and development. Answer:

True

9. Secured and enforced individual property rights provide individuals with incentive to allocate resources efficiently and effectively, advance technologically, take on strategic risks and trade domestically and internationally. Answer:

True

10. According to the quantity theory of money, an increase in the stock of precious metals or bills of exchange usually results in increased trade and rising prices. Both economic events helped merchant capitalists and the king. Answer:

True

11. According to Douglass North (1981, 1993), to knowledgeably understand our present economy or to strategically speculate about its future, it is important to “explain the structure and performance of economies through time.” Answer:

True

12. Secure rights to land provided colonists with incentive to use the land productively, conserve it and invest in it. Answer:

True

13. After 1616, Virginia shifted more and more scarce resources out of food production and into tobacco production. Hence, the economic cost of tobacco production included the sacrifice of food production. Answer:

True

14. The American colonies have a rich and deep history in international trade and immigration. Answer:

True

15. The growth of cities and population usually accompanies growth in commercial activity and vice versa. Answer:

True

16. A bill of exchange necessitated the use of coin and bullion and thus restricted the growth of commercial trade. Answer:

False

Chapter 1

Overseas Empire

17. Today’s corporate structures have very little in common with the joint-stock companies of colonial America. Answer:

False

18. Public funding is not a part of colonial history. Answer:

False

19. Alan Kulikoff (2000) maintains that the opportunity to own land privately provided many individuals with incentive to relocate to colonial America and accept the associated risks. Answer:

True

20. Both indentured servants and slaves had rights in courts of law. Answer:



False

Multiple Choice

Using the economic way of thinking and holding all else constant, choose the best answer among those provided. 1. Prior to and during the period of American colonization, the following occurred in Europe: (a) Feudal rulers found it easy to force peasants and urban producers to work for them as longdistance trade expanded, the costs of warfare increased, and the land/labor ratio increased as consequence of the bubonic plague. (b) Feudal lords shared profits from output with the peasantry and pumped them into investment expenditures, which accelerated agricultural growth. (c) Conflict among lords and peasants led to many peasant and urban revolts, diverting resources away from production and investment. (d) Financial stability enabled the nobility of Europe to foster growth among feudal lands and increase the riches of both rulers and peasants, producing a period of high economic growth. Answer:

(c)

2. With regard to indentured servitude, (a) indentured servants were typically slaves. (b) this institutional arrangement benefited all parties entering the contract. (c) this institutional arrangement restricted the supply of labor for the colonies. (d) all of the above answers are correct. Answer:

(b)

Hughes/Cain • American Economic History, Eighth Edition

3. What was the typical policy of the British colonies toward the practice of “squatting” or freely settling and cultivating the land without any formal transfer of ownership? (a) Squatting was encouraged by colonial officials as a way to encourage settlement of the land. (b) Squatting was discouraged by colonial officials because of the legal ownership of land by the Indians. (c) Squatting was generally discouraged by colonial officials; formal transfer of ownership to settlers was required because the British Crown and their designated officials claimed ownership to the land. (d) There was no general policy toward the practice of “squatting”; it was left to the individual settlers. Answer:

(c)

4. Important sources of conflict in colonial America include conflicts between all of the following except (a) Slaves and masters (b) Native Americans and colonists (c) Puritans, Roman Catholics, and Protestants (d) Indentured servants and masters Answer:

(d)

5. With regard to the subject matter of American economic history, Hughes and Cain (2011) suggest that (a) the presence of the highest living standards known in world history supports the claim that American history is largely a “success story.” (b) the American economy is an economy with only successes but no failures. (c) U.S. history provides a fragmented record of problem-solving and problem-producing solutions to the challenges of economic development. (d) there is no link between today’s economy and the economy of yesteryear. Answer:

(a)

6. What do the foreign leaders investing in the industrial enclaves of developing countries of today have in common with those foreign investors who helped colonize North America? (a) Both sets of leaders exploit the labor of the indigenous people. (b) Both expect to make personal and business sacrifices, take on risks and gain something of high expected value. (c) Both are driven primarily by their desires to extract materials for high profits. (d) Both strive to boost agricultural profits in international markets in the developing countries in which they invest. Answer:

(b)

Chapter 1

Overseas Empire

7. Land ownership or land tenure in colonial America was primarily acquired by settlers through (a) purchase and the legal transfer of deeds from Native Americans. (b) the King granting property to favored individuals in feudal-like fashions. (c) “squatting” or freely settling and cultivating the land to gain private ownership over land. (d) purchase or otherwise legal transfer of deeds from colonial officials who received their rights to the land from the king of England. Answer:

(d)

8. All but which of the following people supplied labor in colonial America? (a) Members of the free population in England and other parts of Northern Europe. (b) Native Americans (c) Slaves (d) Indentured servants Answer:

(b)

9. In colonial America, the average wage laborer (a) received health care benefits, over-time pay and injury compensation. They also worked in safe and healthy environments. (b) achieved a standard of living significantly higher than those standards realized throughout the world. (c) possessed few labor rights, privileges and protections, while being denied the right to vote or organize. (d) had a higher standard of living than workers in Europe but lower health standards because of the rural, isolated conditions of colonial living. Answer:

(c)

10. Which of the following was the most successful attempt to establish a colony with the longest and most sustainable future, according to Hughes and Cain (2011)? (a) Jamestown (b) Plymouth Company (c) Massachusetts Bay (d) Maryland Answer:

(c)

11. Identify which of the following motivated European expansion in America. (a) International trade and finance opportunities (b) Precious metals such as gold and silver (c) The hope of finding a northwest passage to the Orient (d) All of the above Answer:

(e)

Hughes/Cain • American Economic History, Eighth Edition

12. The European subjugation or displacement of Native Americans from their lands (a) was justified largely on the grounds that “might makes right.” (b) was justified largely on the grounds of the “divine right of kings.” (c) derived from the Christian belief of a right of conquest over non-Christian people. (d) was none of the above. Answer:

(c)

13. Developments which marked the beginning of the modern period of Western Europe around the year 1500 did not include which of the following? (a) The rise of nation states and decline in power of the feudal nobility (b) The Protestant Reformation (c) Creation of national markets, commercial growth and exploration abroad (d) The rise of Islam to centralized power in North America Answer:

(d)

14. From Elizabeth I to George III, England strongly influenced the institutional structure of colonial America. This influence is realized today on which of the following fronts? (a) Private property rights (b) The role of international trade and finance in the U.S. economy (c) Population growth through immigration (d) All of the above Answer:

(d)

15. American economic history is important because it will help you understand (a) how to change strategically the course of the future since it was shaped by the past. (b) why some armies failed and others succeeded. (c) how to change the past. (d) how to produce the exact same type of successful growth and development in other countries. Answer:

(a)

16. American economic history actually is a study of (a) stable population growth. (b) how colonial Americans worked side-by-side with the natives to produce stable economic growth and wealth for all individuals. (c) how a small, inconsequential economy grew into a giant economy through a series of successes and failures. (d) how people in other countries created problems for colonial Americans of the past as well as U.S. citizens of today. Answer:

(c)

Chapter 1

Overseas Empire

17. A study of American economic history excludes a study of which of the following? (a) Historical demography (b) The love affairs and private relationships of U.S. presidents (c) Development of market rules and regulations (d) Development of government intervention in market affairs Answer:

(b)

18. Farming in the New England colonies tended to be (a) large scale. (b) worked by slaves. (c) small scale and worked by members of the family. (d) exported to England and its trading partners for high profits. Answer:

(c)

19. Compared to the natives of Northern America, ownership of private property rights was (a) more common to the Europeans than it was to the natives (b) more common to the Indians than to the Europeans. (c) the same. (d) of no value to either group. Answer:

(a)

20. Squatters were considered pioneers or land entrepreneurs by many of the people in (a) England and the New England colonies. (b) the New England colonies and Middle Colonies. (c) the Middle Colonies and Southern Colonies. (d) all of the above. Answer:

(c)

21. Land owners with secure and protected property rights are motivated to (a) use their land productively. (b) maintain their land and its value as long as the land is owned privately and profits are realized by the land owners. (c) not hold their land idle if they face property taxes due to costs imposed by the tax system. (d) link land ownership and personal freedom. Answer:

(d)

Hughes/Cain • American Economic History, Eighth Edition



Essay Questions

1. Economic historians maintain that land, labor, product and service exchanges are influenced largely by the laws of supply and demand and by the rational decision-making processes of individuals. They also maintain that exchanges in informal markets determined by customs, traditions and nation-states are not economically desirable. Why do they make these claims? 2. Explain how increases in agricultural surplus production frequently led to increases in consumption and savings in pre-colonial households. Hold all other economic, political and social factors constant. 3. Describe the American system of private property rights and how they evolved from their English origins. Discuss the relationship between the importance of this evolution and decisions to be productive in the long and short run. 4. Compare and contrast agricultural behavior among the mass population under the systems of feudalism and secured, enforced private property rights. Identify the differences in the incentives to be productive, invest, save and advance technologically. 5. In what ways did the colonial social structure and the attitudes of the colonists stimulate economic activity and growth? 6. The North American continent was well endowed with natural resources and England was relatively poor. Explain why both countries benefited from international trade with each other. 7. Explain the similarities and differences between the attitudes, goals and constraints of the English investors in colonial America and those held by U.S. investors today. 8. Compare and contrast the different ways in which colonists could acquire land for investment, production or distribution. Explain why solid land tenure systems were important to colonists interested in helping the colonies grow and develop. 9. Many individuals came to colonial America with farming skills and knowledge acquired in their home countries. Explain why these skills and knowledge were not perfectly transferable and discuss the importance of learning-by-doing. 10. Discuss the economic roles of colonial entrepôts. 11. In 1607 the London Company invested in the settlement of Jamestown. Why did the London Company make this investment? Why did settlers accept this investment? Who was the deficit spending group? The surplus spending group? Why was this relationship between the two groups economically important and mutually advantageous? 12. Explain why the settlers of Plymouth requested that they be granted the right to work for themselves and pay taxes based on the value of that work. Specifically, comment on why the communal system did not provide incentives for all individuals to be productive, for some individuals to shirk their communal responsibilities and others to renege on agreements to work.

Chapter 1

Overseas Empire

13. Discuss the role of immigration and the growth of the new economy in Boston, Massachusetts, early in U.S. history. Identify some of the short-term challenges when immigration and the rate of settlement slowed in Boston. Describe how these challenges were addressed strategically, resulting in the long-term growth of the market economy there. 14. Explain why transaction costs in a market economy are lower in an economy where individuals speak the same language, share common laws, respect many of the same customs and follow the same accounting practices than in an economy where individuals do not. Link these lower transaction costs to increased trade and economic growth. 15. Describe the property rights held by colonists in North America and link these rights to motives for using resources productively, advancing technologically and accumulating wealth.

Hughes/Cain • American Economic History, Eighth Edition

5. Comment on the following statement: “The events leading to revolution centered around a basic conflict between English mercantile policy on the one hand and the Northern colonial merchants’ need for expansion on the other.” How does one account for the substantial Southern support for the Revolution? 6. Was it in the colonists’ best economic interest to remain British in the short run? In the long run? 7. Summarize the Navigation Acts. Weigh the colonial benefits against the costs of operating under them. 8. What is full employment? Explain why unemployment is costly. Use examples from colonial times to explain why the English and colonists benefited mutually from colonial full employment. 9. Discuss the colonial benefits of the “Industrial Revolution” in England. Explain why the colonists did not necessarily have to incur the same “start up” costs and thus moved quickly into their own industrial phase of production. 10. Describe the economic rationale behind the taxes imposed on the colonists after the British incurred a long and costly war protecting the colonials from the French. 11. Discuss the role of the Navigation Acts in the list of complaints the colonists registered against the British through the First Continental Congress. 12. How could the colonists finance the War of Independence against the British? How did they? 13. Discuss the effects of the American Revolution on average prices, agricultural production and manufacturing. 14. Discuss the role of export and import trade on the eve of the American Revolution.

PART 2 THE NATIONAL PERIOD AND CONSTITUTIONAL CRISIS, 1783–1861

Chapter 5 Westward Expansion 

True/False

Read each statement carefully. Identify whether it is true or false using the economic historian’s way of thinking. 1. Federal land policy of the United States was much less generous toward squatters than some of the colonial government’s land policies before Independence. Answer:

True

2. The object of the Northwest Ordinances of 1785 and 1787 was to preserve the public domain from private exploitation. Answer:

False

3. Provision was made for squatters’ rights in the 1785 Northwest Ordinance. Answer:

False

4. Thomas Jefferson supported the Land Ordinances of 1785 and 1787. Answer:

True

5. The U.S. Constitution established the orderly sale of the western lands. Answer:

False

6. The sale of western land after 1790 was steady and strong. Answer:

False

7. Land sale booms were caused by large waves of immigration. Answer:

False

8. People have incentive to efficiently and effectively use land in the public domain or held by a communal group. Answer:

False

Hughes/Cain • American Economic History, Eighth Edition

9. The sale of western lands failed in its purpose because of corruption. Answer:

False

10. The Articles of Confederation and Perpetual Union (1781) failed because they made governmental controls too restrictive and federal taxes too high. Answer:

False

11. Fifty-five delegates from seven states convened at the first Constitutional Convention (1787) to determine whether the central government of the new, independent country should modify its rules and regulations to permit more or less state sovereignty. Answer:

True

12. The Articles of Confederation and Perpetual Union (1781) adequately addressed the free-rider problems by setting up a tax system that required all states to share the costs of providing national defense, protecting private property rights, regulating commerce with other countries and across states and upholding a system of laws. Answer:

False

13. Charles Beard (1935) argued that the economic self-interest of businessmen, merchants, manufacturers, bankers and investors led them to convene at the Constitutional Convention in the late 1770s. They believed that creating a new, or at least modified, system of laws would help them advance the projects in which they were interested at minimal cost. Answer:

True

14. Thomas Jefferson strongly influenced the passing of the Land Ordinances of 1785 and 1787. A close study of those ordinances suggests that Jefferson believed in the importance of securing the private rights of individuals to buy, sell and derive income from their land. Answer:



True

Multiple Choice

Using the economic way of thinking and holding all else constant, choose the best answer among those provided. 1. Which of the following groups was Jefferson most trying to help in setting up the Land Ordinances? (a) His friends, the land speculators (b) The urban proletariat (c) The small farmers (d) Fellow slave owners Answer:

(c)