The two term graduate sequence for international economics 14.581 and 14.582 provided the following course description in the M.I.T. catalogues, unchanged over the better part of the 1950’s and 1960’s:
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 equibrium in the balance of payments as a whole; current problems of international economics.
For this post I have transcribed six sets of the 1960’s exams for the first course of the sequence taught by Charles Kindleberger.
Kindleberger’s exams for both 14.581 and 14.582 for 1954-55 have been posted earlier, as have his exams for 1950-51.
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Fall Term 1961-62
14.581 International Economics. Professor C. P. Kindleberger. 3 hours/week, 37 Students.
14.581
November 9, 1961
HOUR QUIZ
Answer two questions (equal weight).
- Discus some of the choices which balance-of-payments statisticians must make, and illustrate how the outcomes are governed by the purposes to be served on the one hand, and the nature of the raw material on the other.
- Indicate the contribution which the establishment of a forward market can make to hedging facilities for foreign traders
- Evaluate the Heckscher-Ohlin theorem as an explanation of comparative advantage.
14.581 – International Economics
FINAL EXAMINATION
C. P. Kindleberger
January 23, 1962
NO BOOKS ALLOWED.
Answer question 1 and any three of the following five.
- (one hour) Discuss the relevance to the theory of international trade taken in the widest sense of any three of the classical assumptions of:
a) full employment
b) mobility of resources within but not between countries
c) perfect competition
d) the labor theory of value
e) Say’s Law of markets
How is the theory modified, and the prescription of free trade altered, if the assumptions you deal with have to be revised?
Answer three questions (forty minutes each).
- Which side do you favor in the debate between the elasticities and absorption in the exchange -devaluation problem? Explain.
- To what extent, if at all, does international trade theory illuminate the tariff history of some country with which you are familiar? Give details.
- How do tariffs affect the distribution of income within and between countries? Illustrate, with reference to the relevant theorems.
- Under what circumstances, if ever, are two of the following three weapons of commercial policy justified: a) tariffs; b) quota restrictions; c) foreign exchange control? Compare the measures you treat with alternative means of achieving the same goals, and include in your justification, if you find one, reasons for why the means indicated are superior to the alternatives.
- How is the theory of international trade, and of commercial policy, altered by moving from two to a greater number of countries?
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Fall Term 1962-63
14.581 International Economics. Professor C. P. Kindleberger. 3 Hours/week, 46 Students.
Quiz
14.581
November 6, 1962
Answer both questions. (25 minutes each)
- How does the United States Department of Commerce define a “deficit” in the balance of payments? Comment on the adequacy of this definition.
- Evaluate the success of the Heckscher-Ohlin theory in explaining the basis of international trade.
Tuesday, January 22, 1963
Time 1:30 – 4:30 P.M.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Scheduled Examination in
INTERNATIONAL ECONOMICS 14.581
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 five questions (36 minutes each).
- What difference does the establishment of a forward-exchange market make to the conduct of international trade and exchange?
- The underlying theory of international trade is sometimes called a theory of “comparative costs” and sometimes one of “comparative advantage.” Is there any real distinction between these views? Explain in detail.
- Explain how trade and restrictions of trade alter the distribution of income within and between countries.
- If you were called upon to judge the Alexander-Machlup debate over the adjustment mechanism under changing exchange rates, which side would you favor and why?
- What is the “foreign repercussion” in the adjustment mechanism? How does it operate? Evaluate its significance.
- What difference does it make, when a country restricts its international trade by a given amount, whether it uses tariffs or quotas?
- Do customs unions enlarge welfare?
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Fall Term 1963-64
14.581 International Economics. Professor C. P. Kindleberger. 3 Class Hours/Week, 19 Students.
[Note: one additional section of 14.581 was taught by L. Lefeber with 22 students]
14.581
One-hour Test
November 14, 1963
Answer both questions, which have equal weight.
- What is meant by a deficit in the balance of payments?
- Expound the law of comparative advantage in modern economic terms.
Tuesday, January 28, 1964
Time: 1.30 – 4.30 P.M.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Scheduled Examination in
INTERNATIONAL ECONOMICS – 14.581
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 six (6) questions (one-half hour each).
- In balance-of-payments accounting, practice differs or is disputed in connection with the following items, among others. What are the various ways in which a country may treat five of them, and what is the justification for each possible treatment?
i) immigrants’ remittances
ii) payments to own nationals for carriage of imports
iii) foreign aid
iii) reinvested profits of foreign-owned enterprises
iv) new gold production sold abroad
v) short-term U.S. claims of commercial banks on foreigners
vi) prepayments of U. S. government loans to foreign governments,
- Provide a geometric demonstration of the effect on the terms of trade of technological change in the export good which economizes the scarce factor. State all necessary assumptions explicitly, making them as neutral as possible.
- Does the shift of the analysis of the theory of international trade from two to many countries change the theory? In what respects and to what extent?
- Explain how currency devaluation under full employment affects the balance of payments, and the terms of trade
- Meade states that the adjustment mechanism in international trade is virtually the same under the gold standard and under flexible exchange rates. How does he justify this assertion? Do you agree or disagree? Explain.
- The marginal propensity to spend on home goods out of national income in Country A is 2/3rds, and to spend on imports, 1/6. Country B has similar propensities of 1/2 and 1/4. Country A undertakes new expenditure of 100 divided normally between home and abroad. What amount does B have to change its expenditures to preserve internal balance? What happens to A’s balance of payments?
- The Reciprocal Trade Agreement Acts of 1934 and thereafter, and the Trade Expansion Act of 1962 called for reciprocal reductions of trade barriers. Under what circumstances and to what extent is it useful for a single country to reduce its tariffs by itself without matching tariff reductions abroad?
- Set out at length and in detail the conditions under which customs unions increase world welfare.
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Fall Term 1964-65
14.581 International Economics. Professor C. P. Kindleberger. 3 Class Hours/Week, 29 Students.
HOUR TEST
14.581
November 12, 1964
- Define accurately “lags and leads” in the balance of payments, and discuss their significance.
- What assumption does the Heckscher-Ohlin theorem make about factor inputs of commodities, and what is the significance of this assumption.
Tuesday, January 26, 1965
Time: 9:00 – 12:00 A.M.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Scheduled Examination in
INTERNATIONAL ECONOMICS – 14.581
Answer one question from each of Groups I to IV, and the single question in Group V.
Group I
- Expound the theory of comparative advantage as simply and clearly as you can.
- Does it make a significant difference to the theory of international trade to move from an analysis of two to more than two countries? Explain.
- What are the gains from trade? How are they distributed? How does the gain of a single country change in response to a change in supply abroad? demand at home?
Group II
- Is the purchasing-power-parity doctrine best described as a) a truism; b) a fallacy; c) a useful operational hypothesis? Explain.
- Discuss the similarities and differences between the gold standard and the flexible exchange system.
Group III
- Is free trade the best policy?
- Analyze the slogan “There is nothing that a tariff can do that a subsidy cannot do better”.
- Argue for or against international commodity agreements.
Group IV
- Does a flexible exchange rate make it possible to pursue an independent monetary and fiscal policy internally? Explain.
- What happens to the terms of trade when exchange rates alter?
Group V
- What is the effect on its balance of payments of an increase in foreign demand for a country’s exports.
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Fall Term 1965-66
14.581 International Economics. Professor C. P. Kindleberger. 3 Class Hours/Week, 46 Students.
[Note: No hour midterm exam questions found for the fall term 1965-66.]
Monday, January 24, 1966
Time: 1:30-4:30 p.m.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Scheduled Examination in
INTERNATIONAL ECONOMICS – 14.581
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 Question 1 and 3 others–all of equal weight. 45 minutes each.
- Discuss the significance for the pure theory of international trade of two of the following assumptions:
1) two countries, two commodities, two factors
2) identical linear homogeneous production functions of the first degree
3) the labor theory of value
4) perfect competition in goods and factor markets
5) no transport costs.
- What are the effects of a tariff on the distribution of income between countries and within them?
- Comment at length on the Meade view that financial policies can be used to achieve internal balance, and exchange-rate variation to achieve external balance.
- Write an essay on the “gains from trade,” including, inter alia, a discussion on what countries gain, how much, and under what circumstances.
- Argue for or against discrimination in international trade, including, as one case, the customs union.
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Fall Term 1966-67
14.581 International Economics. Professor C. P. Kindleberger with P. Bardhan, 3 Class Hours/Week, 39 Students.
Hour Test
14.581
December 1, 1966
10:30 a.m.
Answer one question under each of A and B (two in all, half hour each). Use a separate book for each question. Mark with your name and letter and number of the question.
- Describe in detail how a central bank can use forward exchange operations a) to protect its foreign exchange reserves in the event of capital outflow; and b) to gain reserves. What are the benefits of such forward operations? their limits?
- For 1964, 1965, and 1966 first nine months at an annual rate, the United States balance of payments showed the following data:
| 1964 | 1965 | 1966* | |
| (in billions of dollars) | |||
| Gold sales | -0.1 | -1.7 | -0.6 |
| Liquidity balance | -2.8 | -1.3 | -1.2 |
| Official Reserve Transactions Balance | -1.5 | -1.3 | +0.8 |
*First nine months of 1966 at an annual rate, seasonally adjusted except for gold sales.
Did the balance of payments improve or worsen each year? If one cannot say, what more would one need to be able to do so? Explain fully.
B
- Suppose you have a model with two countries, three goods, three factors, and internationally identical fixed-coefficients production functions for each good. What are the sufficient conditions for factor-price equalization in this model?
- In the usual two-by-two trade model if all of wage income is spent on one good and all of rental income from capital is spent on the other good, find out the conditions for uniqueness of static equilibrium in such a model.
- Take a small country in a large world with given terms of trade. Suppose in this country capital grows at a higher rate than labour and there is Hicks-neutral technical progress at a uniform rate in all the industries. What will happen to the wage rate and the rental rate on capital?
14.581T
24 January 1967
FINAL EXAMINATION
Answer question 1 or question 2 (one hour) and three others (forty minutes each)
- Compared to a pre-trade situation how will free trade affect income distribution in the trading countries in terms of the Heckscher-Ohlin model, comment on the assumptions of this model.
- What do you think are the most important limitations of the existing theory of international trade? Give suggestions, in as much detail as possible, about how you would go about removing one or two of them.
- Defend or refute the view of those who claim that free trade hinders rather than stimulates economic growth.
- What difference does it make to the impact of a tariff in general equilibrium what happens to the proceeds of the tariff?
- Comment at length on the usefulness of the purchasing-power parity theory.
- Suppose you have a country large enough to affect world prices. In that context comment on Samuelson’s proposition that “some trade is better than no trade.”
- In a standard two-sector two-factor neoclassical trade model with constant proportions of income being spent on each good, show how patterns of specialization will change with factor accumulation.
- Protectionists argue out — occasionally successfully — a case for government intervention, but a case for government intervention is not necessarily a case for tariffs. Illustrate with reference to the case of external economies in production.
Source: M.I.T. Institute Archives. Charles Kindleberger Papers, 1934-1999. Box 22, Folder “Examinations 14.581, 1949-1966”.
Image Source: Charles P. Kindleberger from the MIT Museum.