Homework Assignment #4 Chapters 15-20 ECON 321B

This homework assignment must be turned in before you will be authorized to take your first unit
exam for Part IV of the course.
Please note that this assignment requires several full essay answers, not just truncated or singlesentence answers. Some of these questions require you to think and bring together various
models, concepts, evidence, and ideas from the textbook. By taking the time to think out these
questions, you will gain a deeper understanding of the material covered in the textbook and the
lectures.
1. Do you think that the gold standard could work as the financial order in the world today? Why
or why not?
2. Write an alternative history that begins with a narrow electoral victory by William Jennings
Bryan in the 1896 U.S. presidential election. How would world events have differed if the United
States had abandoned the gold standard?
3. Was the gold standard responsible for the Great Depression? Discuss.
4. Explain precisely how (1) the gold standard, (2) the Bretton Woods system, and (3) the single
currency in Europe dealt with the trilemma.
5. Write a brief essay explaining why the Bretton Woods order eventually was abandoned in the
early 1970s in favor of a new set of rules after nearly twenty-five years of apparent stability.
6. Investigate the alleged treason of Harry Dexter White (many historians have written about
him). Was he guilty of treason? Evaluate the evidence.
7. Why did Greece have such a deep recession and slow recovery after the 2008 global financial
crisis?
8. The U.S. insurance firm AIG operated under regulations that permitted it to issue insurance
without increasing reserves if it had a credible model showing that there was no risk it would
have to pay out on credit default swaps on the more highly rated tranches of collateralized debt
obligations. Does this make sense?

9. Discuss the advantages and disadvantages of Islamic finance, making specific references to
the traditional banking problems of risk, adverse selection, and moral hazard.
10. Suppose the diagram below depicts the labor market in Oldland before the departure of 1
million workers for another country.
Oldlands Labor Market
Before the Migration

3
VMP

Millions of workers

Assuming that international migration only has supply side effects, show how the departure of
the immigrants affects (a) the welfare of other factor owners in Oldland, (b) the welfare of the
workers who remain in the country, and (c) total output. Calculate per capita output before
immigration and compare it to the per capita income of the two groups remaining in the country
after immigration. Explain your results.
11. Should society maximize the welfare of natives? Or should we be concerned primarily about
the welfare of immigrants? Explain how immigration policy will affect natives and immigrants
differently. How do you think that your countrys current immigration policies affect the welfare
of natives and immigrants?
12. The Statue of Liberty in New York Harbor carries a well-known poem whose last lines are:
Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!
Do these lines give an accurate picture of immigration to the United States? Do they give an
accurate picture of immigration in general? Why or why not?
13. The quote in the textbook from F. Scott Fitzgeralds The Great Gatsby suggests that those
who wield power, the wealthy, are the ones who through their excessive consumption are
disproportionately responsible for damaging the ecosystem. HervKempf goes further and draws
on Thorsten Veblen to justify the same conclusion. What is Kempfs argument?

14. Why, according to many scientists who observe global warming, is it urgent to act now to
restrict greenhouse gas emissions? Why should we not wait until we are absolutely sure that
private industry cannot find a technological solution to the problem? Discuss using the material
from this chapter and any other analysis that might be relevant to the question.