lec_24_111B - ECN 111B: US Economic History since the ECN...

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Lecture 24 Lecture 24 War Again: World War II War Again: World War II ECN 111B: US Economic History since the ECN 111B: US Economic History since the Civil War Civil War Winter 2010 Winter 2010
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Lecture 24 Outline Lecture 24 Outline The onset of the War The beginning of mobilization Tradeoffs in mobilization The Economics of the War Economy Beneficiaries of the War Economy The Economics Legacy of World War II
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Question for the day? Question for the day? Why would the government give the ingredients for Fruit Cake and threaten to nationalize the nation’s cattle herds?
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KEY Readings for Today’s KEY Readings for Today’s Lecture Lecture Essential Reading: Walton and Rockoff 10 th ed. ch. 25
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The Onset of World War II: 1939 The Onset of World War II: 1939 Germany invades Poland in September 1939 For one year the economy anticipates no major war and does not build capacity By 1940 when Germany breaches the Maginot line and invades France it is clear shortages of supplies will exist. Capacity is built up and factories mobilize. Inflation is low since the economy has a lot of “slack”. That is we were far from potential output. By 1941 the choice between guns and butter becomes apparent and inflationary pressures start to kick in.
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The Production Possibilities The Production Possibilities Frontier Frontier
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The Mobilization for War The government took up larger and larger shares of the economy. The civilian economy shrank proportionately but not in absolute terms. It appears that new resources or previously underemployed
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lec_24_111B - ECN 111B: US Economic History since the ECN...

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