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Study Notes: The Great Depression

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Study Notes: The Great Depression
Econ 530
Exam 4 review

Chapters 23, 24, and 20 in Walton and Rockoff. Notes this includes a chapter (Chapter 20) we did not cover in class. The questions below will help you study the material in that chapter and prepare you for your final exam.

2 Articles by Alexander Field: “Economic Growth and Recover in the United States 1919-1941,” and “The Most Technologically Progressive Decade of the Century.”

The Brad Delong article: “The Great Depression from the Perspective of Today, and Today from the Perspective of the Great Depression.”
Questions from Chapter 23.

1. Cite 4 economic statistics that indicate how terrible the Great Depression was.
a. Real GDP Fell 30%
b. Price level falls 27%
c. Unemployed rises from 3% - 25%
d. Durable gods output fell 34%

2. Walton and Rockoff note there are three key questions students of economic history want to keep in mind when we think about the Great Depression. What are those key questions? For each question, provide 2 answers offered by modern scholarship. Be sure to cite one of your two answers for each question. So, for example, for question 1, you might say “Romer (1990) argued purchases of consumer durables, which reflect consumer confidence and are often bought on credit, declined dramatically.” You may also cite our lecture notes, as in Owens (2103) or Delong’s article Delong (2013.
a. What caused the Great Depression?
i. Stock Market Crash of 1929. Destroys 79% of market value as well as excessive optimism for the future of the economy. ii. Friedman and Schwartz (1963) – Decline in stock of money produced by the withdrawal of currency from banking system and the decisions of the banks to hold more reserves.
b. Why Depressed for so long?
i. Owens (2013) Countries stayed on the Gold standard to long (not until 1933). Fed could not alter money supply and deflation remained. ii. Decline in consumer purchases of consumer durables (goods with life >3 years)
1. Paradox of Thrift (
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