Académique Documents
Professionnel Documents
Culture Documents
and new
methods of
production led
to prosperity
more people
invested in the
stock market
Installment
buying
Box 7, 8, 9, 10
- Stock values plummeted
- stockholders were wiped out
- banks and factories shut down
- millions of Americans were left jobless and penniless
- the banking system had collapsed
- nearly 25% of the labor force was unemployed,
- prices and productivity had fallen
- reduced prices and reduced output
- lower incomes in wages, rents, dividends, and profits
- factories were shut down
- farms and homes were lost to foreclosure, mills and
mines were abandoned
- people went hungry.
- inability of the people to spend or to save
Monetary Inefficiency
Reluctant Lenders
Low Expectation
Liquidity Trap
Short- vs. Long-term Rates
Time Lags
imposed rationing
recruited 6 million defense workers
(including women and African
Americans)
drafted 6 million soldiers
ran massive deficits
Government Expenditure
Fiscal Policy
change in government expenditure
change in tax
change in transfer payment
Amount
Desired FS AD shortfall
multiplier
DFS
MPC
DFS
MPC
Amount
DFR
increase Taxes
DFR
MPC
DFR
MPC
Reduce Transfer
Payments
excess AD
multiplier
GDP target
In millions
1,654,753
source:ww.gsid.nagoya-u.ac.jp
Seatwork
Crowding out
A reduction in private-sector borrowing (and
spending) caused by increased of government
borrowing.
Time Lags
Types
of Time lag:
Kinds of debts
Internal
Debts
Treasury
External
Debts
Refinancing
of Debt
Service
of Debt
Opportunity Cost
Crowding
Out
Economic Growth
If
Ceiling
Crowding in
Potential Uses of budget Surplus
Spend it
Prosperity
Depression
Depression
Recession
Recession
Year
Prosperity
Restraint
Depression
Depression
Recession
Recession
Year
Stimulus
Stimulus
Monetary vs Fiscal
Easier to implement
Slower Effect
Difficult to Implement
Faster Effect
Objectives of the
Economy:
MACROECONOMICS
Stable Price
Increasing Production
Low
unemployment
Balance of Payment