American History: 2nd Semester Exam PART 1

Terms in this set (72)

Unequal Distribution of Wealth: During the late 1920s, there were very few wealthy people and a large number of poor people. Because the wealthy had more money than they could spend and the poor did not have enough, neither could purchase enough goods to keep the economy booming

Stock Market Speculation Black Tuesday: label given to October 29, 1929, when stock prices fell sharply. The real value of stocks were inflated for two of the following reasons:
(1) Speculation: buying and selling with the expectation that rising prices will yield quick gains.
(2) Buying Stocks On Margin: When people purchase stocks with a loan

Excessive Use of Credit: The heavy use of credit created superficial prosperity during the 1920s, people became overwhelmed with debt. They eventually realized they had to pay it off and therefore spent less.

Installment Plan situation in which a consumer pays for a purchase over an extended period of time.


Federal Reserve's Monetary Policy: Monetary Policy: the Federal Reserve (not directly controlled by the government) constricts or expands the money supply to stabilize the economy from excessive inflation or deflation.
Immediately before the Great Depression, over ½ of the banks remained outside the control of the Federal Reserve. This is part of the reason that so many banks failed during the 1930s (Great Depression).

Federal Government's Fiscal Policy
TAXING -If Government taxes more, aggregate demand goes down because taxes reduce a person's income. This decreases inflation and increases unemployment.
-The opposite is also true. Taxing less increases supply of money in economy.

Federal Government's Fiscal Policy
SPENDING -If the Government spends more money (on social programs, education, roads, bridges, etc...), aggregate demand goes up because more people are given jobs and have money. This increases inflation and lowers unemployment.
-The opposite is also true. Spending less constricts supply of money in economy.
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