Chapter 6

Question 1

The Roaring 20s

Answer 1

• Mass production & consumer spending
• Peak of innovation with the development of radios & cars
• Low unemployment, high wages = lots of rich people
• More products than people could buy
• Usage of credit cards to purchase things

Question 2

Stock Market Crash

Answer 2

• France was out of the grain field business so the world turned to America for supplies, fueling the Roaring 20s
• France suddenly provided wheat again, causing the market to be overwhlemed and the pricing of grain crashing
• Rushed people into selling their stock
• The panic resulted caused banks to fail as too many people were attempting to withdraw money.

Question 3

The Great Depression

Answer 3

• Resulted from the effects of a free-market economic system
• ## Unemployment rates were off the charts and several businesses shut down

Question 4

Warren G. Harding

Answer 4

• 1921, Republican Harding became president
• Campaigned on a platformt that promised to return society to a “normal state.” (similar to Trumps: “Make america great again”)
• The three central ideas of his platform included:
  1. Isolationism—a retreat from involvement in other countries’affairs, especially European countries
  2. Nativism—the promotion of policies that favour the existing dominant culture in a country and reduce immigration
  3. A reduction of government involvement in the lives of citizen

Question 5

First Red Scare

Answer 5

• Referred to the fear of communism, with the color red being associated with the Bolshevik Red Army of the Russian Revolution.
• Left-wing groups opposed American involvement in WWI.
• The Russian Revolution fueled public fears of a similar communist uprising in the US.
• Large labor strikes in 1919 and 1920 increased public perception of growing support for communism.
• Anarchist bombings, including one on Wall Street, fueled public sentiment against radical political movements and immigrants.

Question 6

Income Disparity

Answer 6

The difference in earnings between the rich and the poor

Question 7

Monopoly

Answer 7

the exclusive ownership or control of trade in aparticular good or service
- A monopoly is a market structure that consists of a single seller or producer and no close substitutes.
- A monopoly limits available alternatives for its product and creates barriers for competitors to enter the marketplace.
- Monopolies can lead to unfair consumer practices.

Question 8

Elkins Act & Hepburn Act

Answer 8

• Created by Theodore Roosevelt to prevent railroad companies from offering preferental treatment to their corporate customers.

Question 9

Taft and the Sherman Anti-Trust Act

Answer 9

• Taft was handpicked by Roosevelt to be his successor as president
• Persued the progressive intiatitives started by Roosevelt (breaking up trusts)
• The Sherman Anti-Trust Act was a piece of legislation to prevent monopolies and collusions (illegal/secret actions) from risking the state of competition.
• Protecting competition > Not allowing domination over the market
• A business entity wasn’t able to take control over two or more competiting businesses.

Question 10

Emergency Quota Act (1921)

Answer 10

• Implemented by Harding
• Reduced immigration by approximately 75 per cent
• Harding’s government attempted to preserve the existing ethnic composition of American society

Question 11

Calvin Coolidge

Answer 11

• Being vice president during the time Harding had died while still in office, Coolidge became Harding’s successor
• Coolidge favoured similar policies to those of Harding and continued to build upon the promises and acts already in place (isonationalism, immgration rates)
• Coolidge’s laissez-faire stance is reflected in the classical liberaleconomic policies of his administration

Question 11

Henry Ford

Answer 11

• Was an industrialist that helped fuel the economic prosperity and rates of consumerism
• Incorporated welfare capitalism into his business model

Question 12

Tariff

Answer 12

• A tax imposed by one country on the goods and services imported from another country.

Question 13

Economic Effects of the Stock Market Crash

Answer 13

• Majority of the population found themselves in major debts
• People and businesses went bankrupt
• Fear that the economy would only continue to go downhill
• Collapse of captialist economic systems

Question 14

Social effects due to the Great Depression

Answer 14

• Unemployment and poverty also led to greater social unrest.
• Strikes and protests became more common
• Left people to question the sustainability of classical liberalism, which later developed the modern understandings of liberalism.

Question 15

Government’s Response to the Great Depression

Answer 15

• Initially, there was a lack of government intervention
• Bennett was elected in 1930 and promoted projects that provided relief for the unemployed, but later on cut government spending believing that laissez-faire policie would eventually lead the economy out of the crisis
• Failure of implementing effective solutions caused Bennet to be replaced with MacKenzie King
• With King in office, more government involvement within the economy gave birth to social programs and modern approaches to a mixed economy

Question 16

Post-War Consensus and Economy

Answer 16

• In 1942, Sir William Beveridge presented a report titled “Social Insurance and Allied Service”
• ## Explained how the role of the government should expand to allow enhance the safety and security of citizens
• Universal Health care and pension plans were implemented (characteristics of a welfare state)

Question 17

Economic Crisis of the 1970’s

Answer 17

• Governments across the world were experiencing political issues in regards to withdrawals from establishments (Brentton Woods Agreement) and the 4th Arab-Israeli war.
• Decrease in production of oil = gas shortages & rationing
• The oil industry impacted the rest of the economy causing the prices of goods to rise.
• As a result, inflation rates increased causing the economy to slow down.
• Unemployment levels are high and weak demand challenged keynesian economics.
• Keynesian theory’s popularity waned then because it had no appropriate policy response for stagflation.

Question 18

Stagflation

Answer 18

• An economic phenomenon in which high inflation rates and a recession coexist at the same time

Question 19

Milton Friedman

Answer 19

• Believed that inflation was primarily the result of anexcess supply of money produced by central banks
• Supply of money increasing would cause consumer spending rates and demand to also rise, resulting in inflation (happened to Germany in 1920’s
• Believe there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with proper regulation of the monetary base’s growth rate.
• Felt that the amount of money issued by the central bank should be linked to economic indicators such as the rate of inflation

Question 20

Reaganomics

Answer 20

• Ronald Reagan became president of the United States in 1981 and was inspired by Friedman
• . At the time, supporters of Friedman and Hayek argued that stagflation was partly the result of huge national deficits from government spending
• To combat stagflation, Reagan wanted less government involvement and embarked on what was later called Reaganomics.
• Reduced income and business taxes, reduced regulation (controls on business), and increased government spending on the military
• These policies areknown as supply-side economics,or trickle-down economics.

Question 21

Monetarnism

Answer 21

The theory or practice explaining that the control of a country’s money supply is the best means to encourage economic growth and limitunemployment and inflation.
- The money supply is controlled throughthe regulation of interest rates
- Most heavily associated with Milton Friedman