Final Exam Notes - 8/7/07 o 1920s prosperity o A lot based...

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8/7/07 o 1920s prosperity o A lot based on automobile o People spending But on credit o Taxes cut, Fed Reserved doubled money in circulation, causing inflation, and doubled credit that banks can loan out. o Substantial credit is available to consumer for first time. o After 1929, America hit trough, lowest ever, and stayed like that until 1941. Depression of surplus Over production Unemployment No one has money to produce what’s needed 25% of population are unemployed o 1941 becomes depression of shortage No one has money available Lasts till 1946 o Economic law In 1929 is general credit expansion Soy’s law All exchanges are ultimately exchanges of good for goods. Means everything has to be paid back… eventually, by someone Ex: automobile down to 250 by 1925, pays cash, is a real asset. If paid 280 in credit have spent money he doesn’t have. Have less money to spend. More credit spending decreases demand. People don’t have actual money to spend now, less money so spend less When there is a lack of demand, factory workers are laid off. Job loss causes another shift in demand, since they have less spending, is a domino effect. More and more people become unemployed. o First cause of depression was lack of demand. Two schools of economics had different theories of solving it. Keynsian: John Maynard Keynes, major economist o Liberal solution o Lack of demand caused depression. Only way to solve is… 1. govt. must cut taxes 2. govt. must aggressively spend money 3. govt. must save money in the good times Classical, or conservative economist, or monetarist. Most are today.
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o Said depression was caused by credit expansion. o To get out of this, expansion must end voluntarily. o After expansion ends, ppl must exchange goods for goods. Ppl must save money to do this. o When there is a substantial savings, there is a self- correcting mechanism; savings will get ppl out of depression due to increased spending of savings. o Savings = investment. Hoover was a Keynesian, believed must spend money, built Hoover dam, LA aqua duct, and San Fran bay bridge. o Spent billions of national debt. o Signed for Smoot-Hawky Tarriff made it impossible for Europe to trade with the US. In order to protect US Jobs. Instead backfires and spread depression the Europe, germany especially. FDR did large amount of spending afterward. Classical today say Roosevelt and Hoover prolonged the depression by prolonging credit expansion. Hoover lived longer than any other president before FDR 1864-1964. o Known to be cold and hard during depression, said to not care Completely opposite of the truth o Hoover was defeated by this depression. o
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This note was uploaded on 06/06/2008 for the course HIST 315l taught by Professor Allison during the Summer '08 term at University of Texas at Austin.

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Final Exam Notes - 8/7/07 o 1920s prosperity o A lot based...

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