In an earlier post I provided the course outline and readings for the first money and banking courses taught by Albert Gailord Hart during the depths of the Great Depression. Today’s post provides transcriptions of the final examination questions for the course. Interesting to note that the course final exam was spread over two days in 1934 and 1935.
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Course description
[Economics] 230. Introduction to Money and Banking.—The material in the course includes a study of the factors which determine the value of money in the short and in the long run; the problem of index numbers of price levels; and the operation of the commercial banking system and its relation to the price level and general business activity. Prerequisite: Social Science I and II or equivalent.
Source: University of Chicago, Announcements [for 1933-34], Arts, Literature and Science, vol. 33, no. 8 (March 25, 1933), p. 266.
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Econ 230
A. G. Hart
FINAL EXAMINATION, DECEMBER 21, 1932
Answer questions I, II and III.
I. (About 20 minutes).
Suppose a large manufacturing firm wants more capital. It might establish a bank with $1,000,000 capital paid in in cash and $1,000,000 in deposits transferred from other banks. Apart from legal restrictions on the amount a bank may lend to a single borrower, could the manufacturing firm borrow $20,000,000 from the bank (reckoning 10% reserve)? If not, how much could be obtained from such a bank? Explain.
II. Answer all four parts, allowing about ten minutes for each:
a) Explain the difference between a sight draft and a cable draft in foreign exchange. Which includes an interest charge? Why?
b) Suppose demand depositors of the First National Bank of Chicago transferred $1,000,000 from demand to time deposits. What would be the change in the amount of reserve deposits which the First National is required to hold at the Federal Reserve? What would be the change in required reserve brought about by a similar shift of deposits in a state bank, member of the Federal Reserve System, in Cleveland, Ohio?
c) Explain what is meant by open market operations. How do they affect the money market?
d) Define Mr. Hawtrey’s concepts of “consumers’ outlay” and “unspent margin”. How do they figure in Mr. Hawtrey’s theory of the price level?
III. Answer any two parts, allowing about twenty minutes for each:
a) Explain the difference between the price level defined by the Fisher form of the quantity equation and a cost-of-living index for the working class. What might cause these two price levels to behave differently?
b) If counterfeiters succeeded in making perfect reproductions of Federal Reserve Notes and placed $100,000,000 in circulation, how would this differ from 1) an expansion of $100,000,000 in bank loans, 2) an extra $100,000,000 in greenbacks used by the government to pay unemployment relief in the following respects: i) effect on prices; ii) effect on the total volume of production and employment; iii) effect on the direction of production; iv) “forced saving”? Give reasons.
c) If citizens of a country increase their investments abroad, what influence will this have 1) on the price of sight bills on a foreign country; 2) on the balance of trade; 3) on the prices of domestic goods in the first country? Why?
d) What is the basis of distinction between “real” and “monetary” theories of the business cycle? Mention and criticise an example of each type.
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Econ 230
A.G. Hart
Hour Examination, August 3, 1933
Answer questions I, II, and III
- Bank Statement:
The following items make up the condensed statement of one of the great New York banks for two recent call dates (to nearest $1000):
| Item | June 30, 1931 | June 30, 1933 |
| (000 omitted) | ||
| 1. Stock of Federal Reserve Bank 2. Undivided Profits 3. U. S. Government securities 4. Other bonds and securities 5. Dividend payable July 1 6. Customers’ acceptance liability 7. Capital 8. Acceptances 9. Real estate 10. Reserve for contingencies 11. Deposits 12. Cash and due from banks 13. Surplus 14. Other assets 15. Other liabilities 16. Loans and discounts 17. Total resources 18. Total liabilities |
$8,880 25,581 281,786 174,500 7,400 169,255 148,000 174,252 35,036 14,720 1,897,544 531,352 148,000 3,030 80,828 1,295,486 2,499,325 2,499,325 |
$8,160 8,705 207,955 246,845 2,590 91,443 148,000 93,354 32,069 3,334 1,408,337 351,374 50,000 15,466 18,747 779,755 1,733,067 1,733,067 |
A. Reconstruct the statement, separating assets from liabilities.
B. Which of the above items represent the investment of stockholders in the back? Do you think the total of these items bears a normal relation to total resources?
C. Does any of the above items show the bank’s primary reserves? If not, try to estimate their amount. Compare primary reserves with deposits. Do you think the proportion shows the bank to be healthy? Explain.
D. Which of the asset items consist wholly or in part of “secondary reserves”?
E. What items would replace #12 in a more detailed statement?
F. Suggest explanations for the decrease between 1931 and 1933 in items 11, 8, 5, 16, and 13.
- Federal Reserve:
A. What is the “open market committee”?
B. List three of the more important powers of the Federal Reserve Board over the Federal Reserve Banks.
C. Name five cities having Federal Reserve Banks
- Quantity Theory
It is the announced policy of the Roosevelt administration to spend about $3,000,000,000 within the next year on public works, raising the funds by borrowing from the Federal Reserve and member banks. In what sense is this “inflation”? Assuming no inflationary or deflationary actio from other sources, how much might this program be expected to raise the “general price level” in the long run? Explain.
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FINAL EXAMINATION
Economics 230
Summer Quarter 1933
(follow link above)
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FINAL EXAMINATION
Economics 230
Winter Quarter 1933
I
(About 30 minutes)
The following was the consolidated statement of the twelve Federal Reserve Banks for March 1, 1933 in abbreviated form:
| Item | March 1 | Feb. 21, 1933 |
| (000 omitted) | ||
| 1. Total gold reserves 2. Total Reserves 3. Discounts secured by U.S. obligations 4. Other discounts 5. Total bills discounted 6. U. S. securities 7. Total bills bought 8. Federal Reserve notes in circulation 9. Total deposits 10. Reserve ratio against notes and deposits |
$2,892,083 3,066,537 418,921 293,470 712,391 1,835,963 383,666 3,579,522 2,157,190 53.5% |
$3,118,393 3,304,644 105,102 222,036 327,138 1,834,233 179,576 3,000,248 2,399,398 61.2% |
Answer parts a) to d): a) Which of the above are asset items in which liabilities? What items are missing which would appear the complete statement? b) What makes up the difference between items 1 and 2 from March 1? c) Explain the changes in items 1, 5, 6, 7, 8 and 9 in terms of the conditions of the week covered, paying special attention to interrelations of the changes. d) Calculate free gold under the regular rules and under the Glass-Steagall Act (assuming notes issued not in circulation to be $100,000,000), as of March 1.
II
Answer all three parts, allowing about ten minutes for each:
a) Explain what is meant by open-market operations by the Federal Reserve Banks. Under whose authority are they conducted? What is their effect on the money market?
b) Explain the method of calculating “net demand deposits” for working out the required reserves of member banks.
c) Write out the Fisher equation of exchange and define the meaning of the symbols used. (Criticism or discussion not called for.)
III
Answer any two parts, allowing about twenty minutes for each:
a) Distinguish between “real” and “Monetary” theories of the business cycle. Mention and criticise an example of each.
b) Discuss: “The very process of financing increased production puts into circulation enough money to buy the added output, so that supply and demand must be equal. After all… trade is but a perfected system of barter.”
c) “In these days of serious world-wide maladjustments the importance of economic stability is likely to be over – rather than underrated.” Discuss.
d) Indicate the advantages and shortcomings of the quantity theory of money 1) for short-run analysis, 2) for predicting long-period tendencies.
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ECONOMICS 230
Final Examination, Mch. 22-23 [1934]
Part I – answer questions 1 – 3 and either 4 or 5
- If the Federal Reserve wishes to diminish the reserves of the member banks, what can it do? Can anything happen to make these measures ineffective? If so, what?
- What is a letter of credit?
- What differences in meaning are there between the price level of Keynes’s first equation and that of Fisher’s equation?
- M. (100%) Nichols, of the First National Bank of Englewood, recently wrote to the R.F.C.: “when I believe that our merchants can safely and profitably borrow money, with a reasonable assurance of paying it back, I shall tell them so… I refuse to take this responsibility as I do not believe this is a safe time either to borrow or to loan.” Discuss this in relation to the government’s claim that refusal to expand bank loans is retarded recovery.
- It has been said that the effects of inflation are primarily on the distribution of wealth, those of deflation on its production. Discuss.
Part II – Answer questions 6-8 and either 9 or 10.
- Distinguish between F. R. Notes and F. R. Bank notes.
- Explain the meaning of “velocity of circulation”.
- Would the following tend to raise or lower the prices of foreign-currency units in dollars: a) increased demand for sugar in this country? b) an increase in our tariff duties on English textiles? c) resumption of payments to our government on account of war debts? d) the rise of wage rates in this country brought about by NRA? Explain briefly in each case.
- Do you think that the Roosevelt monetary policy will succeed in raising prices appreciably? Why and How? If you do, what do you think will be its effect on the following price relationships. Salaries vs. cost-of-living? Wages vs. cost-of-living? Farm prices for crops vs. prices of things farmers buy? Explain.
- Which of the following groups have most to gain by inflation and which least: policeman? Owners of mortgaged down-town real estate? Exporters? Railway bondholders? Railway stockholders? Wage earners? Unemployed steelworkers? Explain in each case, and if you cannot tell whether the group would gain, explain why you cannot.
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Econ. 230
A. G. Hart
Final Examination
December 19-20, 1935
- Gold imports into the United States in the 22 months ending October 31, 1935 totaled nearly $2473 million (new valuation), increasing our monetary gold stocks by about one third. a) Suggest explanations for the movement. b) Estimate the effects of the inflow of total reserves of member banks; on their excess reserves. Explain your reasoning. c) Estimate the effects of the inflow on total reserves and on excess reserves of the Federal Reserve Banks, and explain.
- If American monetary policy brings about a substantial rise of prices within the next five years, how will this affect the interests of a) a widow with an annuity from a life insurance company; b) a railway engineer; c) a university professor; d) an unemployed carpenter; e) a postal clerk; f) an automobile mechanic. Give grounds for your answers.
- State and criticise the views of Gregory on the merits of the American devaluation from an international standpoint.
- Describes a means by which the American monetary authorities could act to stabilise: a) the dollar price of a foreign gold-standard currency, b) the volume of checking deposits in the hands of the public, c) an index number of wholesale prices. In each case what reasons are there for doubting the effectiveness of these means?
- (Optional – write only if time permits.) As among the three sorts of “stabilisation” mentioned, which would you prefer to see made the guide of monetary policy, and why?
Source: Columbia University Archives. Albert Gaylord Hart Papers. Box 61, Folder “Assignments and Other Memoranda for Reserve in Harper Reading Room Econ 230, A. G. Hart”.
Image source: Ibid.