Chapter 7 Flashcards
What happened in the 1920’s?
“Roaring 20’s”
Economic boom
People had lost of money $$$
What happened in the 1930’s?
“Great Depression”
Stock market crash in Oct 24, 1929
People pulled money out of banks
Bank closures, no loans for large purchases/starting businesses, unemployment
The New Deal
The FDR’s policy the create a series of laws & gov’t agencies to help the US out of the Great Depression- would drastically increases gov’t involvement in the economy.
Social Security Act
Required workers and employers to contribute through a payroll tax to the social security trust fund.
Works Progress Administration (WPA)
Employed millions of Americans in public work projects, from constructing bridges and roads, to painting murals & writing plays
John Maynard Keynes
Economist whose approach was adopted in response to dire conditions during the Great Depression.
(- in direct contrast w/ welfare capitalism & classical liberalism which both had no gov’t involvement in the economy)
Keynesian Economics
- Proposes gov’t must play a role in maintaining a stable economy by controlling its boom and bust cycles
Monetary Policy
Refers to adjusting interest rates of a central bank.
- When interest rates are low = easy to get a loan (cheaper)
- People borrow money & spend (buy a home, start a business, buy a car, etc)
- High interest rates = people stop borrowing money & spend less
Fiscal Policy
Gov’t spending/taxation (creating jobs through gov’t agencies and improving social programs - raising taxes)
- gov’t can reduce spending & lower taxes (lower taxes allow companies more profit to expand business, take out loans and hire employees)
Bust
Periods of recession
Boom
Period of inflation, govt should intervene
The Birth of Modern Liberalism (1930’s - present)
-laissez faire capitalism replaced w/ modern liberalism
- rights & freedoms now extended to all members of society, regardless of gender, race , etc
- in addition, govt now involved to an extent in the capitalist economy
Postwar Consensus (1945 - 1970)
(Keynesian economics being followed)
After WWII the consensus of political parties was more govt involvement in economy.
In Canada some examples are:
- Universal Healthcare (1966)
- Canada Pension Plan (1966)
- CRTC (govt regulating media)
Stagflation
The combination of high recession and inflation = stagflation (inflation without growth - stagnant meaning lack of activity)
Economic Crisis of the 1970’s
Egypt & Syria attack Israel in 1973 resulting in the fourth Arab-Israeli war.
- US backs Israel w/ supplies and military aid/weapons
- To punish US, major oil producing Arab states in OPEC (Organization of the Petroleum Exporting Countries) reduce oil production
- supply of oil goes down, price of oil skyrocketed
- consumer food made more expensive = rapid inflation
- caused economy to slow down - people could not afforded to buy products on the market
