Department of Economics
Enter your student ID number below:
Student ID Number
Level / Year 3
Module Code / Title EC313 – The International Economic System in the Twentieth
Century
Exam Paper Code EC3130
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answered.
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STUDENT INSTRUCTIONS
1. Read all instructions carefully. We recommend you read through the entire paper at least
once before writing. (Please also note, further exam instructions are also available at this
link (Examinations Instructions (warwick.ac.uk))
2. Time allowed: 2 hours
3. There is ONE Section in this paper. Answer TWO questions (50 marks each).
4. You should not submit answers to more than the required number of questions. If you do,
we will mark the questions in the order that they appear, up to the required number of
questions in each section.
5. The number of marks available for a question will be stated at the end of each question.
6. You are advised to save your work as you go. You are also asked to compress the images
you upload to the Word document.
, EC3130
Answer TWO questions
Answer:
Marker
Moderator
Answer: This statement is partially correct. The stock market crash was undoubtedly
one of the factors that contributed towards the depression. However, a much
more nuanced perspective is required to understand the depth and length of
the depression. Other economists claim that the banking crisis and role of
policy itself played a pivotal role in the depression and thus, these must be
explored. This essay will delve deeper into the interaction between these
different factors to examine the accuracy of the statement.
Romer (1990) postulates that a rise in future income uncertainty as a result of
the stock market crash in 1929 was a key factor in causing the Great
Depression. Only a tiny fraction of American society held stocks and so the
author concludes that the wealth effect channel is of lower relative
importance. Instead, this paper utilises evidence which indicates that four out
of five prominent business analysts contemporary to that of the 1920s,
exhibited signs of increased uncertainty in the aftermath of the Great Crash of
1929. Higher uncertainty means that consumers delay key consumption
decisions particularly when it comes to durable goods as the purchase is
irreversible for a long time and so additional uncertainty increases the value of
waiting. A regression equation is conducted to directly test the uncertainty
hypothesis. For durable goods, there is a statistically significant and negative
coefficient. This implies that large changes in the valuation of stocks induce
lower consumption of these durable goods. On the other hand, the author
finds a positive coefficient for perishable goods and so changes in stock prices
can induce consumption of these goods This paper is central to the argument
that the Great Crash of 1929 caused the Great Depression via its indirect
2
Enter your student ID number below:
Student ID Number
Level / Year 3
Module Code / Title EC313 – The International Economic System in the Twentieth
Century
Exam Paper Code EC3130
Enter below (in the student use only boxes) the number of each whole question you have
answered.
Student use 2 5
only
Examiner
use only
Moderator
use only
Total Marks Total Marks
Examiner Moderator
------------------------------------------------------------------------------------------------------------------------------
STUDENT INSTRUCTIONS
1. Read all instructions carefully. We recommend you read through the entire paper at least
once before writing. (Please also note, further exam instructions are also available at this
link (Examinations Instructions (warwick.ac.uk))
2. Time allowed: 2 hours
3. There is ONE Section in this paper. Answer TWO questions (50 marks each).
4. You should not submit answers to more than the required number of questions. If you do,
we will mark the questions in the order that they appear, up to the required number of
questions in each section.
5. The number of marks available for a question will be stated at the end of each question.
6. You are advised to save your work as you go. You are also asked to compress the images
you upload to the Word document.
, EC3130
Answer TWO questions
Answer:
Marker
Moderator
Answer: This statement is partially correct. The stock market crash was undoubtedly
one of the factors that contributed towards the depression. However, a much
more nuanced perspective is required to understand the depth and length of
the depression. Other economists claim that the banking crisis and role of
policy itself played a pivotal role in the depression and thus, these must be
explored. This essay will delve deeper into the interaction between these
different factors to examine the accuracy of the statement.
Romer (1990) postulates that a rise in future income uncertainty as a result of
the stock market crash in 1929 was a key factor in causing the Great
Depression. Only a tiny fraction of American society held stocks and so the
author concludes that the wealth effect channel is of lower relative
importance. Instead, this paper utilises evidence which indicates that four out
of five prominent business analysts contemporary to that of the 1920s,
exhibited signs of increased uncertainty in the aftermath of the Great Crash of
1929. Higher uncertainty means that consumers delay key consumption
decisions particularly when it comes to durable goods as the purchase is
irreversible for a long time and so additional uncertainty increases the value of
waiting. A regression equation is conducted to directly test the uncertainty
hypothesis. For durable goods, there is a statistically significant and negative
coefficient. This implies that large changes in the valuation of stocks induce
lower consumption of these durable goods. On the other hand, the author
finds a positive coefficient for perishable goods and so changes in stock prices
can induce consumption of these goods This paper is central to the argument
that the Great Crash of 1929 caused the Great Depression via its indirect
2
