26 Questions
What is one of the consensus solutions to the crisis of the Eurozone?
Improve exporting capacity
What does Paul Krugman suggest as a way to increase productivity in Spain?
Devalue the currency
What is considered an essential characteristic of an Optimal Currency Area according to R. Mundell (1961)?
Symmetrical shocks responses
What was a significant factor that led to the collapse of the Bretton Woods system?
Growing needs for credit in the system
Based on the text, what would ending the Euro cause according to Eichengreen?
The mother of all financial crisis
Which event marked the end of the virtuous circle of fast increase in supply and demand without relevant inflationary tensions?
The exhaustion of economic growth
What was a consequence of the United States' ability to run payments deficits in the amount of foreign governments' and central banks' desired acquisition of dollars?
Progressive relaxation of capital controls required credit to offset speculative flows
What contributed to the tensions between countries with trade deficit and countries with trade surplus during the collapse of the Bretton Woods system?
Reluctance to adjust pegs
What marked China's period of planning from 1949-1978?
Agrarian collectivization and industrialization
What was the primary aim of the Great Leap Forward (1958-1960)?
Rapid industrialization
What were the main features of China's period of reforms beginning in 1978?
Agrarian and industrial reforms
What characterized the third technological revolution?
Communication and information technologies
What led to increased international trade and factor movements during the Second Globalization?
The Second Globalization
What were the benefits of the European Monetary Union (EMU) established in 1992?
Reduced exchange rate uncertainty, lower transactions costs, transparent prices, and price stability
Who criticized the U.S. dollar's 'exorbitant privilege' and threatened to liquidate French dollar balances, endangering the Bretton Woods system?
Charles De Gaulle
Which event led to the suspension of dollar convertibility, marking the end of the Bretton Woods system?
The oil crisis
Who predicted the dollar's instability would threaten the Bretton Woods system, necessitating U.S. deficit reduction due to military commitments and social programs?
Robert Triffin
What led to European currencies floating after the collapse of Bretton Woods, causing the dollar to depreciate against other currencies?
Nixon's suspension of dollar convertibility
Which economic event led to stagflation, characterized by stagnant growth and inflation, and required new macroeconomic policies to address it?
The oil crisis
What policy responses emerged as a result of the oil shock and stagflation (1973-1975)?
All of the above
Which country experienced economic stagnation and debt during the long Brezhnev era, leading to attempted reforms and the collapse of communism?
Soviet Union
What caused Latin American countries to face economic crises?
Unsustainable debt from ISI policies
Which region adopted policies to increase exports, reduce imports, and promote government intervention and control to foster economic growth?
Asian Tigers
What marked the transition to a socialist market economy in China?
Government support for private companies
What event led to the collapse of communism in the Soviet Union?
Economic stagnation and debt during the long Brezhnev era
Who attempted reforms that ultimately failed, leading to political repression, instability, and an economic crisis in the Soviet Union?
Gorbachev
Study Notes
- Charles De Gaulle criticized the U.S. dollar's "exorbitant privilege" and threatened to liquidate French dollar balances, endangering the Bretton Woods system.
- Robert Triffin predicted the dollar's instability would threaten the system, necessitating U.S. deficit reduction due to military commitments and social programs.
- The London Gold Pool (1961) was formed, with countries agreeing not to convert dollars to gold and selling gold instead.
- The Kennedy and Johnson administrations introduced restrictions and controls to manage the dollar crisis, but not its root causes.
- Germany's concerns about inflation from purchasing dollars with marks led to the mark's floating and few European currencies revaluing.
- In August 1971, Nixon suspended dollar convertibility, marking the end of Bretton Woods.
- The oil crisis caused oil shock and stagflation (1973-1975) due to inelastic demand, increased prices, and wage growth larger than productivity increases.
- Monetarist policies, including interest rate increases, privatizations, tax reductions, and deregulation, emerged as a response to macroeconomic instability.
- Latin American countries, following ISI policies, took on unsustainable debt due to low interest rates, appreciation of the dollar, and institutional reforms.
- The Soviet Union experienced economic stagnation and debt during the long Brezhnev era, leading to attempted reforms and the collapse of communism.
- The Asian Tigers adopted policies to increase exports, reduce imports, and promote government intervention and control to foster economic growth.
- China experienced periods of planning, reforms, and the transition to a socialist market economy, marked by government support for private companies.
- The Kuomintang and Chinese Communist Party engaged in a civil war, leading to the proclamation of the People's Republic of China in 1949.
- Nixon's suspension of dollar convertibility marked the end of the Bretton Woods system, ushering in a period of economic instability and change.
- The oil crisis led to stagflation, characterized by stagnant growth and inflation, and required new macroeconomic policies to address it.
- European currencies floated after the collapse of Bretton Woods, causing the dollar to depreciate against other currencies.
- The Soviet Union's attempts to reform their economy under Gorbachev ultimately failed, leading to the collapse of communism and an economic crisis.
- Latin American countries faced economic crises due to unsustainable debt from ISI policies, low interest rates, and appreciation of the dollar.
- Monetarist policies aimed to instill fiscal discipline, reduce inflation, and promote economic growth through increased interest rates and deregulation.
- The Soviet Union's economic stagnation and debt led to political repression, instability, and a failed reform attempt under Gorbachev.
- The Asian Tigers adopted policies to boost exports, reduce imports, and foster economic growth through government intervention, subsidies, and protectionist measures.
- China's economic development evolved from a period of planning to one of reforms and, eventually, a socialist market economy.
Test your knowledge of the economic development strategies and policies implemented in China between 1949 and 1978. Explore concepts such as agrarian collectivization, nationalization of industry, central planning, and the Great Leap Forward.
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