Reading Questions - Chapter 24

Question 1

What did Milton Friedman and Anna J. Schwartz consider the most important reform of the financial system instituted during the 1930s?

Answer 1

The implementation of the FDIRC.

Question 2

Who was Harry Hopkins? What was his philosophy of government aid for the unemployed?

Answer 2

Harry Hopkins was a social worker who was friends with Roosevelt. Believed the most important thing was putting people back to work, while respecting their level of skills.

Question 3

What happened to the gold standard?

Answer 3

• to rebuke converting assets into gold (undermining the banking system).
• breaking the fixed link to other currencies that were on the gold standard, the United States could devalue the dollar (make it cheaper in terms of foreign currency) and so make U.S. exports, particularly of farm products, more attractive.
• In 1934 the United States re-established a fixed price of gold of $35 per ounce which combined with the importance of the United States as a safe haven for assets encouraged an inflow of gold. But this move established a “gold exchange standard” not a classical gold standard:

Question 4

What was the “Second New Deal?”

Answer 4

• What was the “Second New Deal?”
  
  • social security tax and unemployment insurance (tax as well)

Question 5

Economist Joseph Schumpeter was a major critic of the New Deal. What was his complaint with the New Deal?

Answer 5

Applied pressure to businesses with its legislation and that it created fear, preventing investment.

Question 6

Who was Dr. Francis E. Townsend?

Answer 6

• Californian physician that proposed $150/month federal pension after age 60.
• Criticize the new deal.