Download Economics of WWI DemiDrills

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2014
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YE
AR
EDITION
S
DO
ING
OU
RB
ECONOMICS
ECONOMICS
Economics of
World War I
EST
, SO
DEMIDRILLS
EDITOR
Josephine Richstad
®
the World
Scholar’s Cup®
ALPACA-IN-CHIEF
Daniel Berdichevsky
YO
U
CA
N
DO
YO
U
RS
WWI ECONOMICS DEMIDRILLS | 1
IV. An Economic History
of World War I
This DemiDrills section covers pages 104-120 in the official
curriculum guide. It discusses the economic causes and
consequences of World War I, including how the war was
financed and postwar demobilization costs. Fundamental
econonomic concepts are covered in a separate DemiDrills
“tutorial-style” guide.
1.01 MATCHING (104-114)
Match me if you can. Match the letter of each country on the left with the appropriate fact on the right.
Most letters will be used twice.
a. Serbia
_____ 1. Was economically underdeveloped at the start of war
b. Austria-Hungary
_____ 2. Suffered about 114,000 fatal casualties during the war
c. Germany
_____ 3. Had a “backward” economy at the start of the war
d. France
_____ 4. Passed a selective service act in 1917 to mobilize men
e. Russia
_____ 5. Established a naval blockade of Germany almost
immediately after the war started
f. Great Britain
g. Italy
h. United States
_____ 6. Asked Mexico to declare war on the United States
_____ 7. Suffered military deaths equal to 5.7 percent of its
population
_____ 8. Suffered the most extensive physical damage of any
nation involved in the war
_____ 9. Saw the greatest gains in automotive manufacturing
_____ 10. Had substantial agricultural production capacity
_____ 11. Bore the greatest economic cost of any Allied nation
involved in the war
_____ 12. Attacked the Lusitania and the Sussex
_____ 13. Made the declaration that started World War I
_____ 14. Devoted nearly 40 percent of its economic output to
the war effort by 1917
WWI ECONOMICS DEMIDRILLS | 2
1.02 FILL IN THE BLANK (104-109)
Bringing context to a theater near you. Below is a series of statements about early twentieth-century
economics. Fill in each blank with the appropriate word.
1. In total, over
approximately
2.
declared war on
million military personnel were involved in World War I, with
million dead before the official end of the war in 1918.
declared war on
on August 4.
on August 1, 1914, and
3. The British naval blockade of Germany interrupted nearly all
, including the transport of food.
4. The Germans used their new
new kind of
5. In England,
trade with the
to isolate the British economy, thus beginning a
warfare.
output rose by 25 percent from 1913 to 1917, and the increase of
production began in 1915; however,
output decreased.
6. In August 1914, France began building an army of over
coming from
industry.
million men, most of them
7. The greatest economic gains in Italy were observed in the
industries, as well as
.
and
8. Russia’s per capita national income was somewhere between
the U.S. level at the beginning of the war.
and
9. One of Russia’s biggest resources was its enormous
forced to withdraw in defeat from the war in
; unfortunately, it was
percent of
.
10. A German submarine attacked the Sussex because its crew believed it was a
vessel; in reality, it was a French
.
11. The Germans signed a pledge claiming that only
soon violated the pledge, however, sinking
12. American men were drafted into the military through
.
ships were subject to attack; they
American ships in March 1917 alone.
, or compulsory
13. In order to get its soldiers to Europe, America needed a great
transport fleet;
overall, Britain supplied about half the vessels needed, with the rest coming from the
.
14. The
was established in July 1917 to coordinate the American government’s
of war products.
15. An independent committee used a system of
related material.
pricing to set prices for war-
WWI ECONOMICS DEMIDRILLS | 3
1.03 EITHER OR (109-113)
Coffee or tea? Each of these statements about wartime economics needs to be finished. Circle the one
that best completes the sentence. An example is provided.
Example
Scrambled eggs with ketchup are (DELICIOUS, HORRIFIC).
1. In a bulk-line pricing strategy, the intersection of the (VERTICAL, HORIZONTAL) bulk-line and
the (PROFIT, COST CURVE) determines the cost per unit to obtain the required output.
2. During World War I, the United States Price Fixing Committee determined that (100, 80) percent
of the total industry output would be necessary to sustain war efforts, an estimation that resulted in
(SHORTAGES, SURPLUSES) of goods.
3. The U.S. Food Administration, created in 1917, was led by (WOODROW WILSON, HERBERT
HOOVER) and relied on (COOPERATION, RATIONING) for success.
4. The Railroad Administration was created to deal with (THEFT, CONGESTION) that prevented
(SUPPLIES, SOLDIERS) from being transported.
5. President Wilson created the Fuel Administration to set the price of (GASOLINE, COAL); it
remained a part of the government for (FIVE, TWO) years.
6. The loans provided by wealthier members of the Allied and Central powers must be (ADDED TO,
SUBTRACTED FROM) the (NET, GROSS) costs of the war to yield the (NET, GROSS) costs.
7. In total, the (INDIRECT, DIRECT) net costs of the war equaled approximately ($152B, $338B).
8. The (AMERICANS, BRITISH) had the highest per capita gross and net costs among the Allies,
while the (AUSTRO-HUNGARIANS, GERMANS) had the highest per capita gross and net costs
among the Central Powers.
9. Lost production and the capitalized value of lives lost reflect (DIRECT, OPPORTUNITY) costs.
10. In 2005, economists estimated that about (TEN, ONE) percent of the total population of the
involved countries had been lost to war; nearly (THREE, SIX) percent of the Central Powers’
population was lost.
11. Human loss during World War I implies a significant reduction of human (CAPITAL,
PRODUCTIVITY) in the various economies involved.
12. Economists have pointed out the technical problems with the direct and indirect costs calculated for
World War I by (BOGART, BROADBERRY AND HARRISON), revealing that (BRITAIN,
FRANCE) bore the largest costs among the Allied countries.
WWI ECONOMICS DEMIDRILLS | 4
1.04 THE BIG PICTURE (111)
Let slip the costs of war. All the countries involved in World War I paid a steep price in both people and
goods. The figures below are based on Figure 60 in the curriculum guide. Refer to the Nation Bank
below to complete the chart detailing national expenditures.
Caution: The Allies and Central Powers are not separated in this chart, so be sure to look at the big
picture when ranking the countries.
NATION BANK
Germany
Italy
Turkey & Bulgaria
France
British Empire
Russia
Austria-Hungary
Other Allies
United States
NATION
GROSS COST ($MIL)
NET COST ($MIL)
1.
48,523
39,828
2.
40,150
37,775
3.
25,813
24,266
4.
22,594
22,594
5.
20,623
20,623
6.
12,314
12,314
7.
32,080
22,625
8.
3,964
3,964
9.
2,245
2,245
WWI ECONOMICS DEMIDRILLS | 5
1.05 TRUE OR FALSE (113-114)
Cross my heart and hope to score 10,000. Some of the statements below are true. Others are false. If it’s
false, make it true and explain why the statement was wrong. An example has been provided.
T
F
Example: World War Z was about vampires of unusual haste.
zombies
T
F
1. The indirect costs of World War I were minimal for most of the nations involved.
T
F
2. Most of America’s wartime spending was financed by private industry.
T
F
3. American income tax rates were higher after the war than before it.
T
F
4. Tax revenue generated about 35% of total American war spending.
T
F
5. The Federal Reserve financed some of the war by printing $4.4 billion.
T
F
6. During the war, the British cost of living sharply decreased.
T
F
7. Debt financing was the most important means of raising war funds in Britain.
T
F
8. The French financed the early part of the war through long-term debt.
T
F
9. Prior to World War I, France had debt levels around 30% of GDP.
T
F
10. In 1916, France passed a new tax on “extraordinary war profits.”
T
F
11. The German government used debt to finance 81% of its war expenditures.
T
F
12. The hyperinflation experienced in Germany helped pave the way for the Nazis.
WWI ECONOMICS DEMIDRILLS | 6
1.06 DEFINITIONS (107-117)
Forget your abs for a minute. World War I introduced into the economic conversation some interesting
new concepts. Some terms related to this history are listed below. Define each term carefully.
Example: trend
1. Zimmerman
telegram
2. Lever Food and
Fuel Act
3. indirect cost
4. human capital
5. Liberty Bonds
6. excise tax
7. inflation tax
8. Gross Domestic
Product
9. expenditure
approach
10. inflation-adjusted
level
11. durable goods
12. Treaty of Versailles
A prevailing tendency, as when we decided the 1980s were cool again
WWI ECONOMICS DEMIDRILLS | 7
1.07 ANSWER ME THIS (115-118)
One alpaca-sized duck or a hundred duck-sized alpacas? Answer equally confounding questions about
the economic history of World War I below.
Example
Which superhero can leap tall buildings in a
single bound?
A: Superman
1.
Besides the expenditure approach, what is
another way to measure Gross Domestic
Product?
A:
2.
When the expenditure approach is used to
measure GDP, what four categories are
considered in the calculation?
A:
3.
What created a sustained economic boom for
the United States that outlasted America’s
direct involvement in the war?
A:
4.
What happened to the German and Austrian
economies during the war?
A:
5.
About how many soldiers returned to the
American labor market by mid-1920?
A:
6.
What domestic element contributed most to
the American post-war economic boom?
A:
7.
What approximate percentage of its 1913
inflation-adjusted national income level did
Germany reach by 1919?
A:
8.
On what grounds did Germany lodge
complaints against the Allies regarding the
Treaty of Versailles?
A:
9.
What book did John Maynard Keynes
publish criticizing the Treaty of Versailles?
A:
WWI ECONOMICS DEMIDRILLS | 8
1.08 NAME THAT GENIUS (115-120)
Smart economists are in limited supply. Economics wouldn’t be the same without the efforts of some
smart cookies. Match each person below to his accomplishment.
Example: Khan Noonian Singh
Wrathful genetically engineered genius with a passing
resemblance to Sherlock Holmes; possessed of magical
blood; habitually causes the reversible deaths of key
Enterprise crew members.
a.
1. Wesley Mitchell
2. Alan Peacock & Jack Wiseman
3. Robert Higgs
4. Peter Lindert
5. Stephen Broadberry & Mark
Harrison
6. John Maynard Keynes
7. J.A. Salter
8. Ernest Bogart
Countered the “ratchet effect” theory by claiming
that the increasing role of government had been well
established prior to the war
b. Wrote that World War I was a war of “competing
blockades [and] competing armies”
c.
Felt the terms of the Treaty of Versailles prevented
an integrated and unified Europe
d.
Developed technically flawed estimates of the direct
and indirect costs of World War I
e.
Said that “the semblance of a cyclical expansion worn
by wartime prosperity cloaks profound changes in
economic organization.”
f.
Claimed that the ratchet effect only reflected “debt
service payments”
g.
Argued that the “ratchet effect” laid the groundwork
for government expansion during the New Deal
h.
Argued that World War I had a “ratchet effect” on
government spending
WWI ECONOMICS DEMIDRILLS | 9
1.09 FILL IN THE BLANK (118-120)
Blank on it. Below is a series of statements about early twentieth-century economics. Fill in each blank
with the appropriate word.
1. The most important consequence of World War I may have been the groundwork the
laid for the
.
2. According to John Maynard Keynes, the terms of the Versailles Treaty
integrated and unified Europe, which he thought was important to European
an
.
3. Keynes also believed that the Treaty’s terms were
Wilson’s
.
with those laid out in President
4. Wilson’s proposal forced Germans to pay for damage to
,
from sea, or damage from
territory, but not for losses at
.
5. Keynes claimed that the generality of one phrase from the treaty gave an enormous amount of work
to the “
and the
.”
6. In total, the Treaty of Versailles required the Germans to pay $
$
million per year until 1925 and $
afterwards.
7. Keynes argued that $
to the
billion at a rate of
million per year in interest
billion was a more reasonable sum to expect for damages
.
8. Keynes also predicted that “the perils of the future lay […] in
and
.
,
9. Some historians have argued that the Germans were
were
to do so.
,
to pay their debts, but
10. These historians have pointed out that the German reparations were less than those imposed by
on
after the
.
11. Germany’s final reparations payment was made in
of
12.
compared to previous conflicts.
advances made World War I especially
13. The newly developed
warfare.
14. The development of
significant.
15. Many historians believe
.
inflicted large casualties on both sides during
, attack
, and weaponized
really predicted the
was also
of World War I.
WWI ECONOMICS DEMIDRILLS | 10
1.10 TIMELINE (121)
At least until J.J. Abrams gets involved. Draw lines connecting information in the event bank to the
appropriate spots in the timeline below. Each year (or span of years) corresponds to an event in the bank.
Years along the timeline are not distributed to scale.
EVENT BANK
Germany declares unrestricted
submarine warfare
Germany declares war on
Belgium; England declares war
on Germany
Austria-Hungary declares war
on Serbia
Germany declares war on Russia
Zimmerman telegram is sent
from Germany to Mexico
Germany declares war on
France
Peace negotiations between
Russia and Germany begin
A Bosnian-Serb terrorist
assassinates Archduke Franz
Ferdinand
The US declares war on
Germany
Italy declares war on AustriaHungary
The Lusitania is torpedoed by a
German U-boat and sinks
Armistice between Germany
and the Allies
July 28, 1914
Apr. 6, 1917
May 7, 1915
Aug. 3, 1914
Nov. 11, 1918
Jan. 16, 1917
Aug. 1, 1914
Feb. 1, 1917
Aug. 4, 1914
May 23, 1915
June 28, 1914
Dec. 22, 1917
WWI ECONOMICS DEMIDRILLS | 11
Answer Key
1.01 MATCHING
1. G
2. H
3. E
4. H
5. F
6. C
7. A
8. D
9. G
10. E
1.02 FILL IN THE BLANK
1. 70, 9.4
2. Germany, Russia, England, Germany
3. American, Central Powers
4. U-boats (or submarines), economic
5. steel, munitions, coal
6. 5, private
7. mechanical, engineering, hydroelectricity
8. 11, 30
1.03 EITHER OR
1. vertical, cost curve
2. 80, shortages
3. Herbert Hoover, cooperation
4. congestion, supplies
5. coal, two
6. subtracted from, gross, net
1.04 THE BIG PICTURE
1. British Empire
2. Germany
3. France
4. Russia
5. Austria-Hungary
1.05 TRUE OR FALSE
1. False – minimal, substantial
2. False – private industry, government borrowing
3. True
4. False – 35%, 25%
5. True
6. False – decreased, increased
11. D
12. C
13. B
14. F
9. population, 1917
10. mine-laying, ferry
11. merchant, 5
12. conscription, enlistment
13. trans-Atlantic, Emergency Fleet Corporation
14. War Industries Board (WIB), procurement
15. bulk-line
7. indirect, $152B
8. British, Germans
9. opportunity
10. one, three
11. capital
12. Bogart, France
6. Italy
7. United States
8. Other Allies
9. Turkey & Bulgaria
7.
8.
9.
10.
11.
12.
True
False – long-term, short-term
False – 30%, 65%
True
True
True
1.06 DEFINITIONS
1. a telegram in which the Germans asked Mexico to declare war on the United States; was intercepted and decoded by the British
2. a U.S. law passed in 1917 that created the Food, Railroad, and Fuel Administrations to manage resources for the war effort
3. spending and resources contributed to a cause outside the direct costs; in the war, these included property losses, shipping and
cargo losses, lost production, war relief, and capitalized value of civilian and soldier deaths
4. the overall stock of skill and knowledge present among a group of people
5. bonds purchased by Americans who wanted to contribute to the war effort; interest rates ranged from 3.5 to 4.25 percent; four
different issues of the bond occurred from 1917 to 1918
6. a direct tax levied on specific (but not all) goods; during the war, Britain levied these taxes on alcohol, tobacco, tea, automobiles,
and musical instruments
7. a situation occurring when prices and the overall supply of money inflate at a similar rate, decreasing the average person’s
purchasing power
8. the dollar value of all goods and services produced in an economy in a given year
9. a method of measuring GDP in which the total value of final goods and services is calculated by adding up the total spending of
different sectors in the economy
10. a level of GDP in which the price level is held constant so that any changes in GDP reflect actual changes in production
11. goods expected to last an average of at least three years (for example, automobiles or appliances)
12. a treaty signed by the Allies in 1919 that put an end to the war and made significant economic demands on Germany
WWI ECONOMICS DEMIDRILLS | 12
1.07 ANSWER ME THIS
1. the income approach
2. private households, business firms, governments, and foreign buyers
3. European purchases of American goods
4. They contracted sharply.
5. four million
6. spending by business on plants and equipment
7. 55-72%
8. They claimed it amounted to signing its own death warrant.
9. The Economic Consequences of the Peace (1919)
1.08 NAME THAT GENIUS
1. e
2. h
3. g
4. a
1.09 FILL IN THE BLANK
1. peace, Second World War
2. prevented, stability
3. inconsistent, Fourteen Points
4. invaded, sea, bombardments, air raids
5. sophists, lawyers
6. 33, 375, 900
7. 10, Allied countries (or Allies)
8. food, coal, transport
5. f
6. c
7. b
8. d
9. able, unwilling
10. Germany, France, Franco-Prussian War
11. October, 2010
12. Technological, lethal
13. machine guns, trench
14. tanks, aircraft, poison gas
15. economics, outcome
1.10 TIMELINE
June 28, 1914: Bosnian-Serb terrorist assassinates Austrian Archduke Franz Ferdinand
July 28, 1914: Austria-Hungary declares war on Serbia
Aug. 1, 1914: Germany declares war on Russia
Aug. 3, 1914: Germany declares war on France
Aug. 4, 1914: Germany declares war on Belgium; England declares war on Germany
May 7, 1915: The Lusitania is torpedoed by a German U-boat and sinks
May 23, 1915: Italy declares war on Austria-Hungary
Jan. 16, 1917: Zimmerman telegram is sent from Germany to Mexico
Feb. 1, 1917: Germany declares unrestricted submarine warfare
Apr. 6, 1917: U.S. declares war on Germany
Dec. 22, 1917: Peace negotiations between Russia and Germany begin
Nov. 11, 1918: Armistice between Germany and the Allies