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Questions and Answers
What was a key component of expansionary fiscal policy under Reagan?
What was a key component of expansionary fiscal policy under Reagan?
Deregulation during the 1980s only affected the service sectors in the United States.
Deregulation during the 1980s only affected the service sectors in the United States.
False
Name one sign of economic confidence as a result of Reagan's policies.
Name one sign of economic confidence as a result of Reagan's policies.
Appreciation of the dollar
During the Thatcher years, the process of privatization began in _____ .
During the Thatcher years, the process of privatization began in _____ .
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What was a consequence of deregulation in the late 1990s?
What was a consequence of deregulation in the late 1990s?
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The collapse of the Soviet Union in 1991 marked the beginning of a privatization process in Eastern Europe.
The collapse of the Soviet Union in 1991 marked the beginning of a privatization process in Eastern Europe.
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Match the following countries with their significant economic policy or trend:
Match the following countries with their significant economic policy or trend:
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The new economic paradigm during the Reagan era emphasized less _____, less public spending, and less regulation.
The new economic paradigm during the Reagan era emphasized less _____, less public spending, and less regulation.
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What was a significant event that marked the end of the Bretton Woods system?
What was a significant event that marked the end of the Bretton Woods system?
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The Bretton Woods system guaranteed high unemployment rates during its operation.
The Bretton Woods system guaranteed high unemployment rates during its operation.
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What economic ideology rose during the 1970s contributing to the end of the Bretton Woods system?
What economic ideology rose during the 1970s contributing to the end of the Bretton Woods system?
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The dominant economic policy associated with President Reagan is known as _______.
The dominant economic policy associated with President Reagan is known as _______.
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Match the following economic concepts with their descriptions:
Match the following economic concepts with their descriptions:
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What was one of the impacts of the Bretton Woods system on the U.S. dollar?
What was one of the impacts of the Bretton Woods system on the U.S. dollar?
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The economic recovery of Europe and Japan in the 1950s led to a decrease in investment from the United States.
The economic recovery of Europe and Japan in the 1950s led to a decrease in investment from the United States.
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What was one of the main consequences of the 1973 oil crisis?
What was one of the main consequences of the 1973 oil crisis?
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During the Bretton Woods system, which country was a pivotal force in the global economic framework?
During the Bretton Woods system, which country was a pivotal force in the global economic framework?
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The combination of unemployment and inflation during the 1970s was referred to as stagflation.
The combination of unemployment and inflation during the 1970s was referred to as stagflation.
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What economic policies were initially adopted by governments in response to the oil crisis in the developed economies?
What economic policies were initially adopted by governments in response to the oil crisis in the developed economies?
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The first oil crisis occurred in the year _____ as a reaction to the Yom Kippur War.
The first oil crisis occurred in the year _____ as a reaction to the Yom Kippur War.
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Match the economic concept with its description:
Match the economic concept with its description:
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What major economic change began to reshape the role of government in the late 1970s?
What major economic change began to reshape the role of government in the late 1970s?
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In the developed economies during the 1970s, all government responses to the oil crisis were immediately successful.
In the developed economies during the 1970s, all government responses to the oil crisis were immediately successful.
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The Iranian Revolution and the subsequent _____ resulted in a significant drop in oil production in 1979.
The Iranian Revolution and the subsequent _____ resulted in a significant drop in oil production in 1979.
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What was a primary strategy employed by the East Asian Tigers to overcome their initial economic disadvantages?
What was a primary strategy employed by the East Asian Tigers to overcome their initial economic disadvantages?
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Which of the following best describes the concept of catch-up growth as it relates to the East Asian Tigers?
Which of the following best describes the concept of catch-up growth as it relates to the East Asian Tigers?
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Why did the East Asian Tigers have a tremendous potential for catch-up growth after World War II?
Why did the East Asian Tigers have a tremendous potential for catch-up growth after World War II?
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Which institution played a significant role in facilitating the economic growth of the Asian Tigers?
Which institution played a significant role in facilitating the economic growth of the Asian Tigers?
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Which of the following is NOT a characteristic of the state intervention models seen in East Asian economies?
Which of the following is NOT a characteristic of the state intervention models seen in East Asian economies?
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What factor limited foreign investments in the Asian Tigers at the beginning of their economic development?
What factor limited foreign investments in the Asian Tigers at the beginning of their economic development?
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What role did technological advancements in developed countries play in the economic growth of the East Asian Tigers?
What role did technological advancements in developed countries play in the economic growth of the East Asian Tigers?
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What aspect of the East Asian Tigers' economic strategy was considered unsustainable in the long term?
What aspect of the East Asian Tigers' economic strategy was considered unsustainable in the long term?
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What was a significant aspect of the export-led growth policies adopted by East Asian economies?
What was a significant aspect of the export-led growth policies adopted by East Asian economies?
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Which factor contributed to the catch-up growth of East Asian economies?
Which factor contributed to the catch-up growth of East Asian economies?
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How did the state play a role in the economic growth of the East Asian Tigers?
How did the state play a role in the economic growth of the East Asian Tigers?
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What role did institutions have in the success of East Asian economies?
What role did institutions have in the success of East Asian economies?
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Which of the following describes a characteristic of the economic geography of East Asia?
Which of the following describes a characteristic of the economic geography of East Asia?
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What approach did South Korea take towards economic growth compared to its East Asian counterparts?
What approach did South Korea take towards economic growth compared to its East Asian counterparts?
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How did the East Asian economies address their relatively small size in terms of market access?
How did the East Asian economies address their relatively small size in terms of market access?
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What is a defining feature of the developmental state in East Asian economies?
What is a defining feature of the developmental state in East Asian economies?
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What lesson did East Asian economies learn from the failures of the Soviet Union?
What lesson did East Asian economies learn from the failures of the Soviet Union?
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Which of the following statements regarding China’s economic growth is accurate?
Which of the following statements regarding China’s economic growth is accurate?
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What was a major consequence of the Great Leap Forward in China?
What was a major consequence of the Great Leap Forward in China?
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What was one of the major tools used during the Great Leap Forward to increase steel production?
What was one of the major tools used during the Great Leap Forward to increase steel production?
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Which economic model was primarily employed in China from 1953 to 1957?
Which economic model was primarily employed in China from 1953 to 1957?
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How did the Chinese economy transform between 1990 and 2016 in terms of extreme poverty?
How did the Chinese economy transform between 1990 and 2016 in terms of extreme poverty?
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What role did the USSR play in China's first five-year plan (1953-57)?
What role did the USSR play in China's first five-year plan (1953-57)?
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What was a notable characteristic of China's economic transformation post-1990?
What was a notable characteristic of China's economic transformation post-1990?
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Which primary objective characterized the economic policies during the Great Leap Forward?
Which primary objective characterized the economic policies during the Great Leap Forward?
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What significant economic change did China experience between 1962 and 2019?
What significant economic change did China experience between 1962 and 2019?
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Study Notes
The End of Bretton Woods, Deregulation, and the Making of the EU
- Bretton Woods: a stable system, or not?
- The 1970s' shift: featuring the oil crisis and the rise of neo-liberalism.
- Reaganomics and deregulation spread.
Bretton Woods System
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Post-WWII, Bretton Woods ensured:
- Economic growth ("Glorious Thirties")
- Low unemployment (avg. 3% in OECD)
- Monetary stability
- Price stability
- Increased international trade
- Increased international investment
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Bretton Woods was a political and monetary system, with the USA at its center.
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At the time of signing, observers believed the US would always economically outperform other countries, and its trade balance would be permanently in surplus.
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In the 1950s, Europe and Japan recovered economically faster than expected. This caused a dollar outflow from the US to Europe.
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After WWII, the US dollar became a reserve and international currency, facilitating international aid, trade, investment, and military spending. Keynes challenged this, believing it was unsustainable in the long run.
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The US was "buying without spending, lending without giving up, giving without losing."
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The system had problems:
- Central banks stockpiling dollars increased domestic inflation,
- Demand for goods outpaced production capacity.
- The US was in a position to use international capital without cost.
Possible Actions (Not Taken)
- Decrease Public Spending
- Increase Taxes to limit demand (only implemented in mid-1968)
- Increase interest rates.
Meantime in the World
- The Baby Boomer Generation's exposure to mass media
- Civil Rights Movement
- Nuclear Attacks
- Women's Rights
- War in Vietnam
- Social Movements
- Peace Movements
- Anti-Capitalism Movements
This is the End, My Golden Friend, the End
-
In August 1971, Nixon had two choices
- Remain committed to dollar convertibility or
- Pursue national objectives (limited wage growth, spending cuts)
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Nixon selected the second option and declared dollar inconvertibility.
-
In 1972, measures were taken:
- Devaluation of the dollar against gold (-10%)
- Increased tariff protection (+10%)
- Price and wage controls
1970s Energy Crisis
-
Two Oil Crises (1973 and 1979):
- Yom Kippur War and Arab OPEC
- Iran's revolution and Iran-Iraq war
- Sharp increase in oil prices (oil tripled in price in months after 1973 )
-
Oil prices led to an inflationary spiral (e.g., 12% in US, 14% in France, 16% in UK, 23% in Japan) in 1974
-
Inflation + stagnation = stagflation
The 1970s: A Pivot of Change
- Not all inflation was caused by the oil crisis.
- Developed economies had initially a Keynesian response (expansive monetary policy + fiscal policy).
- Fiscal stimulus had increased public sector employment and welfare spending.
- In developing countries, the common response was to import more, leading to increased debt.
- The triangular circulation of money began in the 1970s involving oil-exporting countries, big international banks, and LDCs who borrowed to buy imports and repay oil debts.
Crisis of International Debt
- Third World countries debt increased by 4-5 billion annually as the US interest rates increased
The 1970s: A Pivot of Change
- Keynesian strategies failed to yield satisfactory results, paving the way for neo-liberal thinking.
- Governments started reducing regulation and spending.
Monetarist vs. Supply-Side Economics
- Monetarism: managing the money supply to combat inflation.
- Supply-side economics: reducing taxes and barriers to increase production.
From Carter to Reagan
- Paul Volcker's restrictive monetary policy combatted US inflation.
- Interest rates rose from 10% to 20%
- US economy experienced a recession (nominal + Real).
Reagan and the Reaganomics
- 1981: The Economic Recovery Act - massive fiscal stimulus.
- Fiscal policy: tax cuts for upper-middle class, increased spending on military.
- Deregulation.
- Effects: Dollar appreciation, reduced unemployment (late 1980s).
The Reaganomics Beyond the US
- Similar processes took place in other major OECD countries (France, Italy).
- The collapse of the Soviet Union aided the move to a market economy.
- Deregulation was focused on industrial and service areas in developed countries.
- Several European public enterprises were privatized.
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Description
Explore the complex transition from the Bretton Woods system to the deregulation era and the rise of the European Union. This quiz examines the economic conditions and key events of the 1970s that shaped today's global economy, including the oil crisis and Reaganomics.
