Lecture08_fall2009

Lecture08_fall2009 - Ec183 Fall 2009 Leah Boustan Lecture 7 The Great Depression The facts GDP declined by 33 over 5 years unemployment rates

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11/1/2009 1 Ec183, Fall 2009 Leah Boustan Lecture 7: The Great Depression • The facts: GDP declined by 33% over 5 years; unemployment rates increased to 25% • What caused the Depression? Stock market crash? Bank panics? Gold Standard? The Great Depression in historical context Source (next three slides): Bordo, Goldin and White, Defining Moment
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11/1/2009 2 Dramatic rise in unemployment rate Accompanied by fall in price level (deflation)
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11/1/2009 3 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) Today: Two possible causes • Stock market crash – Did decline in wealth reduce consumption? – Did uncertainty reduce durable purchases? • Banking panics – Did falling deposits reduce money supply? – Importance of the money multiplier
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11/1/2009 4 Source: White, JEL , 1991 Stock market crashes do not necessarily lead to economic downturn
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This note was uploaded on 01/25/2010 for the course ECON 183 taught by Professor Boustan during the Fall '09 term at UCLA.

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Lecture08_fall2009 - Ec183 Fall 2009 Leah Boustan Lecture 7 The Great Depression The facts GDP declined by 33 over 5 years unemployment rates

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