Lecture_notes10

Lecture_notes10 - Lecture 10 The Great Depression The facts...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 10: The Great Depression • The facts: GDP declined by 33% over 5 years; unemployment rates increased to 25% • What caused the Depression? Was it a ‘monetary’ or a ‘real’ phenomenon? Stock market crash? Bank panics? Gold standard? The Great Depression in its 20 th c. context Source (next three slides): Bordo, Goldin and White, Defining Moment
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Drop in industrial production and rise in unemployment Accompanied by fall in price level (deflation)
Background image of page 2
Fall in aggregate demand driven by consumption GNP Consumption Investment Exports 1920-21 -2.4 6.5 -41.7 -14.2 1929-30 -8.9 -5.4 -35.6 -19.1 1937-38 -5.4 2.1 -53.1 1.7 • Government spending also increased from 1929-30 Remember: Y = C + I + G + (X – IM) % declines in each variable Exports only 6% of GDP Source: Temin (1976) Possible causes • Stock market crash – Falling wealth reduced consumption? NO – Uncertainty reduced durable purchases? NO • Banking panics – Falling deposits reduced money supply • Gold standard – Debt-Deflation theory
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Source: White, JEL , 1991 Possible connection between stock market crash and consumption • Investors lost wealth. Consumption is, in part, a function of wealth. So, consumption declines. – But, few households invested in the stock market in this period. 5 million investors (at most). 30 million families. So, ~16%. • Aggregate household balance sheets show small declines in financial assets.
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/13/2009 for the course ECON 183 taught by Professor Boustan during the Winter '09 term at UCLA.

Page1 / 12

Lecture_notes10 - Lecture 10 The Great Depression The facts...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online