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A Historical Comparison on Great Recession and Great Depression: From Economics Point of View

A Historical Comparison on Great Recession and Great Depression: From Economics Point of View. Aiperi Ismailova , Johnathan Ives, Miles Kinnamont, Layla Lee. Great Depression & Recession. Historical explanation for both the Great Depression and Great Recession

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A Historical Comparison on Great Recession and Great Depression: From Economics Point of View

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  1. A Historical Comparison on Great Recession and Great Depression: From Economics Point of View AiperiIsmailova,Johnathan Ives,Miles Kinnamont, Layla Lee

  2. Great Depression & Recession • Historical explanation for both the Great Depression and Great Recession • The Effects these Economic problems had on the US Economy • What the US did to fix these problems

  3. Great Depression: Stock Market Crash • October 23 1929 Stock Prices plummeted in the last hour of trading. • While the market was closed investors panicked. • On October 28th “ Black Monday” the Dow Jones had dropped 13% • The next day “ Black Tuesday” investors exchanged 14.6 million shares of stock. • Sharp decline of the market caused demand for goods to decline. • 25 Billion Dollars lost in crash

  4. Bank Failures • Between 1929 to 1933, over 9000 banks suspended operations due to financial duress. • Many Speculations to why this happened • Bank Panics due to decrease in Money Supply • Bank Failures due to decline in GDP

  5. Decline of Consumer Spending • The Stock Market Crash Caused a collapse in durable and non-durable goods spending • High unemployment rates • Gold Standard Crisis • Us went off the Gold Standard

  6. Great Recession: Housing Market Crash • Subprime Mortgages defaulted • Between 2007-2012, 4 million households were foreclosed, which led to more houses to become foreclosed • 19.2 Trillion Household wealth was lost • Household net worth fell considerably • Lehman Bros. went bankrupt • Other Institutions: Freddie Mae, Fannie Mac AIG,Merrill Lynch

  7. Declining Consumer Spending • US Consumption declined in 2008 • Decline in consumption caused a sharp decline of wealth

  8. Comparison of GDP

  9. Comparison of Unemployment Rate

  10. Comparison of CPI

  11. International Real GDP

  12. International GDP Cont.

  13. Great Depression Solution • The Banking Act of 1933 • Federal System of Bank Deposit Insurance • Regulation of the combination of commercial and investment banking and other restrictions on “speculative” bank activities • SEC and the Securities Act of 1933 • Trust Indenture Act of 1939 • Established FDIC

  14. Great Recession Solution • Interest Rates on Loans decreased • Policies were put in place to prevent sub-prime mortgages • Tax Relief Act of 2010 • Troubled Asset Relief Program • Purchase Assets and Equity from financial institutions to strengthen the financial sector

  15. Conclusion • Giant Declines in Economic Activity • Big Market Failures • GDP, Unemployment, and CPI were similar, but the Depression was much more devastating • Different Policies such as Banking Act of 1933 and the Tax Relief Act of 2010 were formed to fix the problems • So the Business cycle repeats itself starting with the Great Depression and ending with the Great Recession

  16. Questions?

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