From the middle of the twentieth century and for the entire pre-Bhagwati and pre-Dornbusch years, Charles P. Kindleberger taught international economics to M.I.T. graduate students. This post provides the midterm and final examinations from the 1950-51 academic year.
Note: The final examination for 14.581 that I have transcribed below comes with no date, though from the file it is clearly a reworked version of the exam for Ec 59 (the earlier course number) dated January 28, 1949. This version of the exam with handwritten corrections is next to the hourly exam from November 1950 in the archive folder which makes it seem likely to correspond to the exam for January, 1951 (but there is a gap for final exams in 14.581 from 1950-1953 so we can’t be really certain).
________________
Course Announcement
14.581, 14.582. International Economics. [Kindleberger] The foreign exchange market, foreign trade and commercial policy, with emphasis on the relation of the items in the current account to national income; international finance and the achievement and maintenance of equilibrium in the balance of payments as a whole: current problems of international economics.
Source: Massachusetts Institute of Technology. Catalogue Issue for 1950-1951 Session (June 1950), pp. 135, 170.
________________
14.581 Hour Test
Prof. Kindleberger
11:00 a.m., Tuesday,
November 14, 1950
Define; sketch briefly the content of; and discuss the present usefulness of the following three concepts in international trade and exchange:
(15 minutes)
- The purchasing power parity doctrine.
(20 minutes)
- The doctrine of comparative costs
(15 minutes)
- The foreign-trade multiplier
Source: MIT Archives. Charles Kindleberger Papers, Box 22, Folder “Examination 14.481, 1949-1966.”
________________
Scheduled Examination in
INTERNATIONAL ECONOMICS 14.581
[undated, possibly January, 1951]
NOTE: Students are not permitted to use any books, notebooks or papers in this examination. If brought into the room they must not be left on the desks.
ANSWER ANY EIGHT
- Assume that the currency of country A is under speculative attack. Under what circumstances should the monetary authorities in A encourage or discourage interest arbitrage between the spot and futures markets?
- What are the effects of undervaluation of a country’s currency on exports, imports, prices, income and terms of trade?
- Describe how trade can substitute for factor movements. Since trade can so substitute, how do you account for the fact that trade flourishes more between industrial countries, which have different factors in roughly the same proportions, than between industrial and agricultural countries?
- A report of the European Council set up under the Marshall plan stated that
“Even though American productivity is much greater per capita than Europe’s, the Europeans should be able to compete with American industry in its own market in branches where American productivity exceeds that of Europe by only 50 to 100 percent, for example.”
Discuss the implications of this remark, in terms of the doctrine of comparative advantage, for as many aspects of the comparison between the American and European economies as are relevant.
- How does the foreign-trade multiplier vary with the propensities abroad to save and to import? What difference is made in your answer if the country concerned is the United States or Switzerland?
- What happened to the terms of trade between Western Europe and the rest of the world between 1900 and 1938? Why?
- In making balance-of payments estimates, what are the ways one can treat payments to domestic shipowners for carriage of exports and imports respectively? How are these various ways to be reconciled for each of exports and imports?
- Which of the following explanations of the recent troubles faced by the Waltham Watch Company do you favor?
BOSTON HERALD editorial
“…The Swiss product (jeweled watches) enjoyed a competitive advantage despite the existing low American tariff because of much higher American tariff because of much higher American labor costs….”
Letter of Mr. Harold T. Partridge to the Boston Herald, published January 1, 1949:
“We can blame if we wish the Hurlburts of Elgin, the Millers of Hamilton and the Fitches of Waltham, who at the time of the writing of the Paine-Aldrich tariff bill (1909) employed their own lawyer, Mr. Romney Spring, to write that part of the bill pertaining to the entry of watches into this country. At that time there should have been…the establishment of a system of horological engineering such as is employed by the Swiss….”
- Are you inclined to support or oppose renewal of the international wheat agreement? Explain its advantages and disadvantages from the short- and long-run for wheat farmers, the United States as a whole, the world.
- The Economist favors discriminatory import restrictions and opposes multiple exchange rates. Aside from the special problem of sterling cross-rates, is this position logical? Attack or defend it.
Source: MIT Archives. Charles Kindleberger Papers, Box 22, Folder “Examination 14.481, 1949-1966.”
________________
14.582 Hour Test
11:00 a.m.
Thursday, April 5, 1951
BOTH QUESTIONS HAVE EQUAL WEIGHT.
- Describe in great detail a hypothetical case of transfer of an autonomous long-term capital inflow and refer specially to the following:
commercial banks
central banks
gold movements
movements of short-term capital
multiplier
accelerator
marginal propensities to import, invest
short and long-term rates of interest
terms of trade
current account balance
- Discuss the various possible impacts of the industrialization process on foreign trade:
- of the industrializing country
- of the rest of the world.
Source: MIT Archives. Charles Kindleberger Papers, Box 22, Folder “Examination 14.482, 1951-1976.”
________________
Scheduled Examination in
INTERNATIONAL ECONOMIC—14.582
Monday, May 28, 1951
Time: 1:30-4:30 P.M.
NOTE: Students are not permitted to use any books, notebooks or papers in this examination. If brought into the room they must not be left on the desks.
Answer questions 1 or 2 (one hour), and three of the remaining five questions (40 minutes each).
- Define equilibrium in the international economic position of a country. Illustrate what is implied in this definition in terms of (a) the relevant variables (such as foreign exchange rate, national income, terms of trade, etc.), and (b) departures from it.
or
- Classical economic theory assumed that the factors of production, including capital, were immobile internationally, and that an equilibrium system could be maintained despite this fact, by means of the law of comparative advantage and the gold standard mechanism (or the paper standard). Do you agree that this is true or are capital movements, at least, necessary? Explain.
……………………….
- Discuss the purposes of two of the following international economic institutions and their effectiveness in terms of these purposes:
- The International Bank for Reconstruction and Development
- The Organization for European Economic Cooperation
- The European Payments Union
- Compare and contrast the Exchange Equalization Account (U.K.) and the American Stabilization Fund.
- What role may and should direct investment play in the economic development of underdeveloped areas?
- Comment fully on the cure for the economic difficulties faced by Europe in 1946-48: “Halt the inflation and adjust the exchange rate.”
- Short-term capital movements may give rise to and/or may substitute for gold movements. Discuss the processes involved.
Source: MIT Archives. Charles Kindleberger Papers, Box 22, Folder “Examination 14.482, 1951-1976.”
Image Source: Charles P. Kindleberger from the MIT yearbook, Technique 1950.