Great Depression and New Deal

NRA

National Recovery Admin. It helped : Laborers Purpose : Established codes of fair practice and set prices, production levels, minimum wages, and maximum hours. Reform - set min. wages and max hours + abolished child labor

"Supply-Side" Economics

Political Party : Conservative (Repub./Libertarian) How stimulate economic growth : Cut taxes for wealthy & corporations in hopes they reinvest (stock market or own businesses) in hopes it "trickles down" in form of new jobs.

"Keynesian" Economics

Political Party : Liberal (Democrat) How stimulate economic growth : Deficit Spending. - Govt. borrows $ to start projects (construction, etc...) that create jobs for people.

Explain how Federal Reserve's Monetary Policy (Discount rate; Fed Funds rate) caused the Great Depression

Problem : Over 1/2 of the banks remained outside the control of the Federal Reserve immediately before the Great Depression.

Unemployment % at worst part of Depression

25%

Stock Market Speculation

Purchasing stocks in hope to make a quick profit.

Hoovervilles

A "Hooverville" was a shanty town built by homeless people in the US during the Great Depression. They were named after Herbert Hoover.

Which is worse? A depression or recession?

A depression is much worse

Explain how Restrictive Trade Policy (Hawley Smoot Tariff) caused the Great Depression

A law enacted in 1930 that established the highest protective tariff in US history, worsening the depression in America and abroad. - If the government taxes imported goods, other nations will place tariffs on our exported goods. As a result, we will sell fewer goods in other nations.

Mixed Economy

Some economic decisions are made by private business owners; others are dictated by government officials and their policies.

Monetary Policy

The Federal Reserve (not directly controlled by the government) constricts or expands the money supply to stabilize the economy from excessive inflation or deflation.

Command Economy

Central government officials make all economic decisions for the people.

CCC

Civilian Conservation Corps It helped : Unemployed Purpose : An operation from the army that planted trees, erosion control, fire prevention, land reclamation and pest control. Recovery : The CCC gave jobs to unemployed single men ages 17-25 years of age.

Explain how Bank Failures caused the Great Depression

During the 1930's, the stock market crash and bank failures led to a loss of wealth and a decline in consumer confidence. This led to decreased spending and a rise in unemployment (making the depression worse). - After "the crash", many people panicked and tried to withdraw their money. During the Great Depression over 6,000 banks failed.

Market Economy

Economic decisions are made in the marketplace through interactions between buyers and sellers according to the laws of supply and demand.

How the federal government and federal reserve can help stop deflation

Fed gov. : Lower taxes and increase spending Fed reserve : decrease interest rates and expand the money supply

How the federal government and federal reserve can help slow inflation

Fed gov. : Raise taxes and decrease spending Fed reserve : Constrict the money supply and increase interest rates

FDIC

Federal Deposit Insurance Corp. It helped : Investors Purpose : Provided stability to the economy and failing banking systems by making them sign up for FDIC insurance. FDIC insurance insured bank accounts up to $5,000 Reform : It became proof to americans that the banks were safe

Contractionary Monetary Policy

If interest rates are high, this constricts the supply of money in the economy because it's more expensive to take out a loan. It slows spending and inflation, and raises unemployment.

Expansionary Monetary Policy

If interest rates are low, this expands the supply of money in the economy because it's cheaper to take out a loan. This increases spending and inflation and lowers unemployment.

Social Security Act

It helped : Elderly + (sort of unemployed) Purpose : Gave people who were 65 or older monthly earnings depending on how much they made before. Provided assistance to the blind and handicapped Recovery : credited as the most important factor in reducing elderly poverty rates during the hight of the depression Reform : Still in use today

New Deal

Legislation and programs enacted by FDR to help promote economic and social reform during the Great Depression. It greatly expanded the federal governments role in economy.

Differences between liberal (democrat), conservative (republican), and radical (communist) approaches to the economy

Liberal : A "hands on" approach. Increase federal aid to the poor Conservative : A "hands off" approach. Stimulate the economy by tax breaks, cut federal spending, and provide little to no aid to the poor. Radical : A "choke hold" approach. Make all citizens equally wealthy by seizing income from the wealthy and redistributing it to the poor. And Government had control over all businesses.

Deflation

Too little money in the economy with too many goods equals declining prices

Inflation

Too much money in the economy with too few goods equals rising prices

3 fundamental Economic Questions

What to produce? How to produce? Who gets what is produced?

Recession

When a nation's GDP contracts for two consecutive quarters

Long term impact of New Deal on Government's power and involvement in economy

With the New Deal, the federal government broke from the tradition of laissez faire, or leaving the economy alone, which had characterized most of American history. Now, the federal government accepted responsibility for spurring economic growth.

Depression

economic downturn where the GDP declines by more than 10%.

Wagner Act

(Also National Labor Relations Act) It helped : Laborers Purpose : Extended democratic rights to the work place. It gave workers the right to organize, collectively bargain, and go on strike without being fired. Reform : they were trying to correct issues in labor industry

GDP

(Gross Domestic Product) : Total value of ALL goods and services produced in a country in a given year. - Important measure of the strength of a nation's economy

Causes of the Dust Bowl

- Human : Grassland was converted to wheat fields, which was high in demand during WWI, exhausted the soil and made it dry and flaky. - Natural : Massive drought

Results of the Dust Bowl

- Massive migrations of "okies" and "armies" to the Pacific Coast - Sped up process of urbanization in America - Worsened effects of the Great Depression because if farmers lost their land, they could not make money to purchase "stuff."

Huey Long

-Governor of Louisiana -U.S. Senator (1932) -"Share Our Wealth" -Outlaw incomes over $1 million and inheritances over $5 million Radical

Franklin D. Roosevelt

-He became the 32nd U.S. president in 1933, and was the only president to be elected four times. - Created the New deal programs -Liberal

Herbert Hoover

-served as head of the American Relief Administration -President Warren G. Harding then picked Hoover to be his secretary of commerce Conservative

AAA

Agricultural Adjustment Act It helped : Farmers Purpose : Government paid farmers to reduce production. The idea was to raise prices by lowering the amount of goods. Recovery : making farmers lives better temporarily

Explain how Stock Market Speculation (Buying on Margin) caused the Great Depression

Buying on Margin : When people purchase stocks with a loan. - When stock prices plummeted many people could not repay the money they were loaned.

Explain how Excessive Use of Credit (Installment Plan) caused the Great Depression

Installment Plan : Situation in which a consumer pays for a purchase over an extended period of time. - the heavy use of credit created superficial prosperity during the 1920s, and people became overwhelmed with debt. They eventually realized that they had to pay it off and therefore spent less.

Explain how Federal Government's Fiscal Policy (taxing/spending) caused the Great Depression

Revenue Act of 1932 : raised federal income tax rates across the board, with the rate on top incomes rising from 25 % to 63%. This took money out of the hands of citizens, which helped decrease aggregate demand. This was before the depression and they were taking money out of the hands of people.

SEC

Securities Exchange Commission It helped : Investors Purpose : Restored confidence in the stock markets by providing investors + the markets with more reliable information + clear rules of honest dealing. Reform : Long lasting; still around today

WPA

Works Progress Admin. It helped : Unemployed Purpose : Helped partially/unskilled workers get jobs by building schools, airports, tennis courts, golf courses, and libraries. Recovery : It helped people find jobs after the Great Depression

Fiscal Policy

government spending and taxing for the purpose of stabilizing the economy