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8th: Social Studies (Semester 2) > U7L6 A Global Economy > Flashcards

U7L6 A Global Economy Flashcards

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1
Q

Why did the United States face a recession in the late 2000s?

A

It was soon discovered that part of the reason for the recession was fraud in the stock market, faulty lending practices, and over-borrowing.

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2
Q

What did trade agreements with countries in the Americas and Asia do for the U.S. as a country?

A

It strengthened U.S. relations and opened trade in new areas.

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3
Q

What did trade agreements with countries in the Americas and Asia do for American businesses?

A

American businesses benefited from lower production costs and the opening of new markets for trade.

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4
Q

What did trade agreements with countries in the Americans and Asia do for American consumers?

A

Americans consumers benefited from lower prices for good services.

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5
Q

What is globalization?

A

The spread of a global economy

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6
Q

What problems did some American workers have due to globalization?

A

Some American workers suffered when companies moved work overseas.

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7
Q

What was the main problem with globalization?

A

When one country suffered an economic crisis, the entire global community was at risk.

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8
Q

In the 1990s, what caused the American economy to grow strongly?

A

The growth was partly due to the creation of new businesses and jobs in the technology industry.

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9
Q

What did many Internet start-up companies also known as?

1990s

A

Dot-coms

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10
Q

What risky businesses practices did many Internet start-up companies do?

A

They thought that if the number of customers increased, then the profits would increase too. This worked for some companies but not for all of them.

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11
Q

Because investors saw potential to make profits from dot-coms, what did they do?

A

They bought stock in the companies.

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12
Q

What did the high demand of stocks in the dot-coms industry, what was created?

A

A stock-market bubble

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13
Q

What is a bubble?

Ex: stock-market bubble

A

A bubble is an unstable condition of prices driven above the real value of an asset by buyers hoping that prices will rise further.

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14
Q

Why did the bubble burst around the dot-coms industry? What did this cause?

A

Many dot-coms failed to yield a profit, so the bubble burst and stock prices plunged.

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15
Q

After the bubble burst, how many investors wanted in?

A

No one, Investment in these companies dried up.

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16
Q

What happened to dot-com companies between 1999 and 2001?

A

Many had to close down.

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17
Q

What happened to some dot-com companies that didn’t close down?

A

Other companies, such as Google and Amazon, suffered losses but survived and eventually grew.

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18
Q

What did the bursted dot-com bubble do to the U.S. economy?

A

The American economy entered a recession in 2001, which was when most dot-com companies closed down.

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19
Q

What is a recession?

A

A recession occurs when the economy shrinks instead of growing.

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20
Q

How did the 911 attacks hurt the economy?

A

It hurt the stock market and the transfer of American manufacturing jobs to other countries deepened the recession.

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21
Q

How did the federal go government respond to the economic crisis?

A

By lowing taxes

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22
Q

What did the Federal Reserve System do to respond to the economic crisis?

A

They lowed interest rates to encourage people and businesses to borrow.

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23
Q

When did the economy start recovering?

A

In 2003 and 2004

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24
Q

When the stock market crashed in 2000, what did Americans realize contributed to the 1990s boom?

A

Fraud

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25
Q

What fraud happened in the 1990s?

A

Accounting firms and banks had increased stock prices by hiding the companies’ real financial situation.

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26
Q

How did Enron, a Houston energy company, exemplified the trend of fraud?

A

Enron bought and sold electricity instead of producing it on its own. The company falsely reported billions of dollars in profits. A Texas jury convicted Enron executives of fraud, but it was too late to help investors.

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27
Q

What as damaged when the fraud at Enron was exposed?

A

Fraud at Enron damaged Americans’ trust of corporations in general.

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28
Q

What was NAFTA and what did it do?

A

The North American Free Trade Agreement (NAFTA), established in 1993, linked the United States, Canada, and Mexico in a free trade zone.

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29
Q

When did the United States join the World Trade Organization (WTO)?

A

1995

2 years after NAFTA

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30
Q

What does WTO do?

A

The WTO works to remove barriers to and encourage trade and investment among countries.

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31
Q

What did NAFTA and WTO encourage the United States to do?

A

Negotiate similar agreements in other areas of the world.

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32
Q

When was the Central America Free Trade Agreement (CAFTA-DR) formed?

A

2005

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33
Q

What did the CAFTA-DR do?

A

It created a free-trade zone between the United States and several Latin American countries.

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34
Q

When did the U.S. negotiate free-trade with South Korea?

A

2007

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35
Q

Why was the free-trade agreements controversial?

A

These agreements led some American businesses to move operations to other countries, where workers pay was lower and environmental regulations were weaker.

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36
Q

What is one of the world’s main trading and investment alliances?

A

The European Union (EU)

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37
Q

Which countries does the EU include?

A

Most European countries

38
Q

In 2004, what did countries did the EU expand to?

A

To include countries from Central and Eastern Europe and the Mediterranean.

39
Q

What benefits were there in the membership in the EU?

A
  • new opportunities

- attracted American investment

40
Q

Why could the EU affect the U.S. economy?

A

Many American banks and other firms opened branches within the EU to have access to its large market.

41
Q

What was a problem with the Global economy?

Banking

A

The banking system throughout the world became closely connected. If the European banking system or the American banking system faced trouble, both sides would suffer the consequences.

Foreshadow 👀

42
Q

What was the euro?

A

In 1999, most countries in the European Union adopted a shared currency, known as the euro. The countries using the euro were known as the euro zone.

43
Q

How was the Euro-zone connected to the United States?

A

Euro-zone companies held large investments in the United States, and U.S. firms had large investments in the euro zone.

44
Q

More foreshadow 👁👁

A

As a result, economic problems in Europe could hurt the United States. If euro-zone countries had less money to invest, Americans would have less money to grow new or existing businesses. If people and businesses in the euro zone had less money to spend, they would buy fewer products from American exporters.

45
Q

What worldwide financial phenomenon has benefits, like the expansion of trade opportunities, but also presents potential problems?

A

Globalization

46
Q

What is a dot-com?

A

an Internet start-up company

47
Q

What is one of the world’s main trading and investment alliances?

A

The EU

48
Q

To recover from the recession in 2001, the Federal Reserve System lowered interest rate. What did this do for Americans?
(Housing)

A

It allowed more American to buy homes.

49
Q

Why did the lower interest rate make houses more affordable?

A

Low interest rates made larger mortgages affordable.

50
Q

What is a mortgage?

A

A loan to buy a piece for property that allowed the lender to claim the property of the mortgage is not paid.

51
Q

What created a housing bubble?

A

The demand for homes and mortgages increased, home prices also increased.

52
Q

What are subprime mortgages?

A

Offering money to people who considered lending risks because they could not easily afford the payments.

53
Q

Why did banks and mortgage companies give subprime mortgages?

A

They thought that home prices would keep increasing.

54
Q

Why did borrowers risk defaulting, or not being able to pay their mortgage?
(Subprime mortgage)

A

In the beginning, subprime mortgages had low interest rates, but the rates were often adjustable so that they could increase with market rates.

55
Q

What caused the housing bubble to burst in 2006 and 2007?

A

In 2006 and 2007, overbuilding and a flood of sellers seeking to cash in on high prices for their homes caused American home prices to drop, which burst the housing bubble.

56
Q

What happened once house prices dropped?

A

Many homeowners owed more on their mortgages than their homes were worth.

57
Q

What happened when interest rates increased? Why couldn’t the owner sell their house?

A

When interest rates increased, some could not pay their mortgages. They also could not sell and recover their investment because their homes had lost value.

58
Q

What caused an economic crash?

A

Many of these borrowers defaulted on their mortgages, and banks repossessed, or foreclosed on the homes. Foreclosures left Americans without homes and left banks with massive financial losses.

59
Q

The United States entered another recession in 2007.

A

This triggered an economic crisis in which banks stopped making loans, businesses stopped expanding, and the stock market crashed.

60
Q

The stock market crash and the mortgage crisis in 2007 led Americans to cut back on their spending. What did this effect other businesses?

A

Reduced spending caused American businesses to fail, which increased unemployment. Consumers lost their jobs, their homes, their retirement savings, and their confidence in America.

61
Q

What effect did the decrease in American spending have on globalization?

A

Decreases in American spending caused job losses for America’s trade partners, such as China and Mexico.

62
Q

Why did the burst of the house bubble hurt the EU?

A

Because Europe’s banks had bought subprime mortgages from American banks.

63
Q

How was the EU affected by U.S.’s recession?

A

Governments across Europe were forced to cut back, European banks stopped lending, and Europe went into recession, too. Europe’s recession hurt American businesses because they lost sales in Europe.

64
Q

Why did the European recession affect the U.S.?

A

Europe’s recession hurt American businesses because they lost sales in Europe.

65
Q

Why did the U.S. government do, believing that government involvement would damage banks?

A

For decades, the United States government had cut regulations.

66
Q

When did the government reverse its policy of the lack government involvement?

A

When the financial crisis resulted from what many saw as weak regulation.

67
Q

In 2008, what did congress provide to struggling industries?

A

In 2008, Congress provided money to bail out, or save, struggling insurance companies, banks, and financial institutions.

68
Q

What did the Bush administration think of large banks?

A

The Bush administration thought that many large banks and financial firms were “too big to fail.”

69
Q

What did the bailout help with?

A

The bailout helped ensure the survival of these companies, but the economy remained weak.

70
Q

What condition was America in when Obama was elected president?

A

Americans were still experiencing the effects of the economic recession. The unemployment rate for the year averaged close to ten percent. Fourteen percent of Americans lived below the poverty line. Home prices continued to fall.

71
Q

What was the American Recovery and Reinvestment Act?

2009

A

The act aimed to stimulate the economy and reduce unemployment.

72
Q

What could Congress do under the American Recovery and Reinvestment Act?

A

Congress supplied funds to create jobs, increase unemployment and food stamp benefits, and reduce taxes.

73
Q

How did the funds from the American Recovery and Reinvestment Act help communities?

A

Funds from the act also provided unemployment assistance. Improvement projects at schools and airports and on highways created jobs and helped communities.

74
Q

What did a number of economists think about the American Recovery and Reinvestment Act?

A

A number of economists have argued that the recession would have been more severe without this stimulus.

75
Q

What problems did critics have with the American Recovery and Reinvestment Act?

A

Many felt that it had been…

  • ineffective
  • was too expensive
  • had increased the federal deficit for no purpose.

Some claimed that it increased unemployment.

76
Q

How did the American Recovery and Reinvestment Act affect policy Al parties?

A

The act also created sharp political divides between the Democratic and Republican parties. All Republicans in the House of Representatives voted against the act. Only three Republican senators voted in favor of it.

77
Q

When did the recession end?

Seemingly

A

2010
…
The stock market rallied, and it appeared as if the recession had ended by 2010, in the sense that the economy returned to growth.

78
Q

Why did Americans struggle even though the economy seemed fine in 2010?

A

State and local governments reduced their work forces. The national unemployment and poverty rates remained high. In some years, the number of new jobs was lower than the number of young people reaching working age. The number of manufacturing jobs rose, but job creation did not reach pre-recession levels.

79
Q

What does a debt ceiling do?

A

The debt ceiling limits the amount of debt that the United States can owe. When the country nears the debt ceiling, Congress must vote to raise the limit, or the country risks default, or failure to repay a debt, and a possible financial crisis.

80
Q

What caused America to near its debt ceiling?

A

Tax cuts, wars in Iraq and Afghanistan, and slow economic growth had pushed America’s debt to near its limit.

81
Q

When Obama asked for a rise in the debt ceiling, what did Republicans in Congress do about it?

A

They asked for a compromise

82
Q

What comprise did republicans want in order to raise the debt ceiling?

A

Congress had to raise the debt ceiling to keep the country operating, but Republican members were only willing to do that if the President agreed to reduce the federal government’s spending.

83
Q

What debt crisis occurred in Europe?

A

Between 2009 and 2012, six euro-zone countries acknowledged that they were struggling to pay their debts and were facing default. Greece was the first country to show signs of problems.

84
Q

Why did European and international agencies all provide bailout money?

A

If banks are worried about money they have lent to governments, they are less likely to lend money to businesses and individuals.

85
Q

What did the bailout do to Europe?

A

This bailout brought a temporary solution to the European debt crisis, but a number of countries continued to face heavy debts and a lack of economic growth. It was not clear that the debt problem had been corrected.

86
Q

What could happen to the interest rates on subprime mortgages?

A

They could go up with market rates.

87
Q

What happened to consumers when the stock market and mortgages fell in 2007?

A

They lost their jobs, homes, retirement savings, and financial confidence.

88
Q

What was the criticism of the American Recovery and Reinvestment Act?

A

It is ineffective and too expensive.

89
Q

Which of the following decisions bear shows the U.S. government’s willingness to participate in the global economy?

A

Joining the World Trade Organization

90
Q

What is the European Union?

A

A major trading and investment alliance

91
Q

What relationship existed between subprime mortgages and foreclosures when home prices fell?

A

Many people with subprime mortgages could not make their payments, so foreclosures increased.

92
Q

Which is an example of a purpose of the American Recovery and Reinvestment Act?

A

Creating jobs with projects to improve roads and airports

8th: Social Studies (Semester 2) (57 decks)

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