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The Great Depression

The Great Depression. What is a depression? What caused the Great Depression? What was the economy like in the 1930s?. Healthy Business Cycle. Unhealthy Business Cycle. Recession vs. Depression. Recession: more than 8 consecutive quarters of decreased growth in national output

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The Great Depression

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  1. The Great Depression What is a depression? What caused the Great Depression? What was the economy like in the 1930s?

  2. Healthy Business Cycle

  3. Unhealthy Business Cycle

  4. Recession vs. Depression • Recession: • more than 8 consecutive quarters of decreased growth in national output • A significant decline in economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales • Depression: • a long time of decreased growth in national output (more than 12 consecutive quarters) • A prolonged and continued significant decline in economic activity spread across the country, lasting more than a few years, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales

  5. 1930s Economy http://www.ssa.gov/history/briefhistory3.html

  6. What was “feeding” the Great Depression? Germany in the 1920s • Too much money put into circulation • Value of the money went down • Prices went up U.S. in the 1930s • Too little money in circulation • Value of the money went up • Prices went down INFLATION DEFLATION

  7. President Herbert Hoover(1929-1932) • Fiscally conservative president • Mining engineer, then Sec. of Commerce before president • Believed government and economy should be separate • Organized “volunteer” efforts to try to stop Depression

  8. Hoover Blankets • Hoovervilles • Hoover Wagon • Hoover Flag

  9. President Franklin Roosevelt (1933-1945) • Campaign slogan was “New Deal” for the American people • Surrounded himself with his “Braintrust” • Felt it was the responsibility of government to intervene in economy in a massive way

  10. John Maynard Keynes • British economist • Worked with British government to address Depression in Great Britain • Radical ideas regarding role of government in economy

  11. Keynesian Economic Theory • A circular flow of money: when spending increases in an economy, earnings also increase, which can lead to even more spending and earnings • “Prime the pump”: Keynes argued that government should step in to increase spending, either by increasing the money supply or by actually buying things itself • Against the practice of too much saving and not enough consumption, or spending, in an economy

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