Transcript The Great Depression

The Great Depression
1929-1939
Economics 101
• What is the “economy”?
• What causes the economy to grow?
• What causes the economy to slow
down or go into recession?
Introduction to Economics
Economy:
– The way in which we produce and distribute goods and services for
our society.
Types of Economy
– Human beings have invented many different ways to do this:
• Hunter-Gatherers – hunter, gathered and shared everything (real
communism)
• Medieval Feudalism – 90% of the people work and toil to keep the
fortunate 10% of the population comfortable and well fed
• Modern Capitalism – those with capital ($) established businesses
where they can exploit the labour of those without $, thereby
creating profit
• Communism – A system whereby the state exploits the labour of
everyone (really, a system where you pretend to work and the
state pretends to pay you!)
What makes the economy work?
Demand:
• Our wants – things we
need and desire
• Human beings are a
“wanting” animal –
every society needs
things in order to
survive – we organize
ourselves to produce
these wants
How are Supply and Demand Related?
• Supply:
– The availability of a good or
service
• Supply and demand are
inversely related
– As demand increases, supply
will decrease
– As supply decreases, prices
for that thing will rise
• This applies to virtually
anything that can be bought
and/or traded (food, housing,
technology, but also currency)
So, what causes an economy to grow?
• When demand increases,
businesses begin to produce
more
• To produce more, they
must hire more people
(labour) and buy more raw
material (commodities)
• More people working also
means more demand as
people spend, and on and
on it goes…
• As a result, prices for all
these things will rise – this
is called inflation
What causes an economy to shrink –
go into recession?
• If inflation goes too high,
people can no longer afford
things – they stop buying
• This creates less demand,
and leads to oversupply
• Prices begin to drop,
businesses slow down
production, workers lose
their jobs – even less
demand, and so on…
• This is called a recession this is very bad!