3 economic questions
What to produce?
How to produce?
Who gets what is produced?
Market economy
Economic decisions are made in the marketplace through interactions between buyers and sellers according to the laws of supply and demand.
Command economy
Central government officials make all economic decisions for the people.
Mixed economy
Some economic decisions are made by private business owners; others are dictated by government officials and their policies.
GDP
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.
Recession
When a nation's GDP contracts for two consecutive quarters
Depression
economic downturn where the GDP declines by more than 10%.
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.
Fiscal Policy
government spending and taxing for the purpose of stabilizing the economy
Inflation
Too much money in the economy with too few goods equals rising prices
Deflation
Too little money in the economy with too many goods equals declining prices
Unemployment rate at its worst
25%
Margin buying
Borrowing money to buy a stock
Installment plan
Situation in which a consumer pays for a purchase over an extended period of time.
Hawley Smoot Tarrif
A law enacted in 1930 that established the highest protective tariff in US history, worsening the depression in America and abroad.
What did discount rate (Fed Funds rate) fall under?
Federal Reserve's monetary policy
What did taxing and spending fall under?
Government Fiscal Policy
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. It increases spending and lowers unemployment.
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.
How the Fed gov help to slow inflation
Raise taxes and decrease spending
How the Fed reserve help to slow inflation
Constrict the money supply and increase interest rates
How the Fed gov help to stop deflation
Lower taxes and increase spending
How the Fed reserve help to stop deflation
decrease interest rates and expand the money supply
Hoovervilles
A "Hooverville" was a shanty town built by homeless people in the US during the Great Depression. They were named after Herbert Hoover.
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.
Liberal (democrat) approach to the economy
A "hands on" approach. Increase federal aid to the poor
Conservative (republican) approach to the economy
A "hands off" approach. Stimulate the economy by tax breaks, cut federal spending, and provide little to no aid to the poor.
Radical (communist) approach to the economy
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.
Federal Deposit Insurance Corp. (FDIC)
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
Securities Exchange Commission (SEC)
Restored confidence in the stock markets by providing investors and the markets with more reliable information and clear rules of honest dealing.
Civilian Conservation Corps (CCC)
Lowered the unemployment rate and get men from 17-25 to join this program. The men that worked for this did environmental labors.
Works Progress Administration (WPA)
Helped partially/unskilled workers get jobs by building schools, airports, tennis courts, golf courses, and libraries.
National Recovery Administration (NRA)
Assured laborers minimum wages and maximum hours within each day.
Social Security Act
Gave people who were 65 or older monthly earnings depending on how much they made before. Provided assistance to the blind and handicapped
Agricultural Adjustment Act (AAA)
Reduced the supply of wheat and other crops in order to increase the demand, in turn increasing prices
Wagner Act
Extended democratic rights to the work place. It gave workers the right to organize, collectively bargain, and go on strike.