Study Sheet for Midterm 1
1.Be able to describe why understanding economic history is so important.
• Understand and study the environment that brought about specific historic outcomes.
• Cliometrics: The use of economic theory and statistical analysis data side by side
• Economic history is fascinating because it draw parallels to today, looking at “path dependence” features from today are dependent on previous experiences.
• Understanding history so we do not make the same mistakes.
2. Know the definition of path dependence and be able to give an example of path dependence from the
course.
Path dependency says that features present today are dependent on previous decisions or experiences
made in the past. An example of path dependency is inflation, where expected current and future inflation
is influenced by past inflation.
3. Be able to give an example of how we can learn from economic history in order that we do not make
the same mistakes.
We could look at past debt crises and defaults to understand the risks of Sovereign default.
4. Be able to define cliometrics and give an example of where it has been used in the course.
Cliometrics is the use of economic theory and statistical analysis data side by side. Economic historians
use cliometrics as their number 1 tool in their analysis. We can study how workers were phased out by the
industrial revolution and apply that to how factory workers are being phased out by the recent movement
in artificial intelligence and technology.
5. What was the background of the Northern European commercial revolution?
Northern European commercial revolution began in the late Middle Ages. It received stimulus from the
voyages of exploration undertaken by England, Spain, and other nations to Africa, Asia and the New
World. It created the acceptance of principle of mercantilism, the creation of a money economy,
establishment of such new institutions as the state bank and the features market. The commercial
revolution helped set the stage for the industrial revolution.
6. Be able to describe the Portuguese discovery of the Cape of Good Hope and the Spanish discovery of
the “New World” along with the Treaty of Tordesillas How did these discoveries impact the other nation
states of Europe?
In the Treaty of Tordesillas, Spain got all lands more than 370 leagues west of the Cape Verde islands.
Portugal got the east side. The rest of Europe wanted to complete, so they hoped to get a favorable trade
balance.
7. Know the definition of mercantilism and know what inspired this view of trade.
Mercantilism: The broad idea that money (gold + silver) = Power. A central gold of nations become to
acquire more gold and silver.
Two ways to acquire gold and sliver
i) Find it or take it from someone.
ii) Maintain a trade surplus.
Export > imports.
When Britain exports goods to Spain, Britain receives gold from Spain in exchange for goods. So if you
export more than import, you receive gold on net.
Mercantilism view of trade: A trade surplus is good, and a trade deficit is bad. Contrast ECON 101 view
of mutual gains from trade, comparative advantage.
8. Be able to describe the link between mercantilism and colonization of the North American Colonies.
British wanted North American commodities line tobacco to export to the rest of Europe to maintain and
grow trade surplus.