Study Guide Test 3 - Add underemployment and it jumped to 33 1931 survey of 10 major U.S cities estimated the unemployment rate of

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40. What is the “replacement rate” of investment? Why does the economy’s productive capacity decline if the current level of investment is less than the replacement rate? The amount of spending, usually on investment needed to maintain capital stock (buildings, tools, machinery, etc.). Better capital allows technology and specialization to occur, leading to increases in productivity. Productive capacity declines if investment is below the replacement rate because none of those are allowed to happen. 41. How did the unemployment rate among African-Americans in the 1930s compare to the overall unemployment rate? Discuss the reasons for the differing rates of unemployment. Unemployment rate in 1933 was approaching 25%.
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Unformatted text preview: Add underemployment and it jumped to 33%. 1931 survey of 10 major U.S. cities estimated the unemployment rate of African-Americans at 50%. This was due to heavy discrimination and heavy employment in the service sector. 42. Use the S&P Index and the figure on p. 458 to compare the stock market of the 1920s and 1930s with the 1996-2003 stock market. Is a recession the inevitable follow-up to a stock market crash? In 1929, the index was $26.02. In 1932, it was $6.93. A recession is not an inevitable follow-up to a stock market crash. The government can take steps to keep the economy from receding. A recession may be likely to occur after a stock market crash, but it is not inevitable....
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This note was uploaded on 03/19/2008 for the course ECON 2200 taught by Professor Moore during the Fall '07 term at University of Georgia Athens.

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