Questions to answer:
1. How did the Great Depression start?
The Great Depression was caused by a number of causes. The stock market crash on Black Tuesday, October 29, 1929 caused stockholders to lose more than $40 billion. In addition to the stock market crash over 9000 banks were forced to close due to debt or failure. Their closures were closed by over-loaning and getting no money in return for those loans. The stock market crash on Black Tuesday was caused because of people heavily investing in the stock market with more money than they actually had (eg. Loans). When creditors wanted their money back the investors went bankrupt, this caused a chain reaction in the stock market which eventually lead to the Great Depression.
2. How did the current recession start?
The current recession was caused by increasing gas prices. With gas becoming so expensive, the economy slowed down and people were less inclined to spending. This is not the only reason why the current recession started; housing prices dipped. There was less demand for houses and therefore less demand for construction. Banks held mortgages at higher prices than the market price for the houses themselves. When people could not pay off the mortgage, the banks would take the hit. There were more foreclosures than what the banks had predicted which meant the banks were losing money. This lowered the available amount of credit out there which in turn hurt our economy and started the current recession.
3. How did the government take part following the event? Were / are they successful attempts?
The government played a big role in the Great Depression. President Franklin Roosevelt proposed the “New Deal” in which the government would implement more programs and regulate the economy more carefully. The New Deal was actually two time periods; the First New Deal in 1933 and the Second New Deal in 1934-1936. The First New Deal assisted with the parts of the economy that needed the most help such as banking and farming. The Second New Deal promoted labour unions, created the WPA and the Social Security act. The New Deal did help with the financial situation, however, it was not successful at completely getting the country out of the Great Depression.
4. What factors are present now that was not present during the Great Depression?
(ie. Banking, online resources, etc.)
The Great Depression and the Current recession are indeed very similar. Most of their causes were loan related. However, the Current Recession presents some factors that the Great Depression did not. The Great Depression was not set in a virtual time period like we are in today; there wasn't any credit card debts or online shopping. So exchange of money and goods was significantly slower. Trade with other countries wasn't fast at all. Financial support from other countries would take a while to get to us. Basically, the Great Depression was slower, it would be slower to drive yourself into debt, but it was also slower to dig yourself out of it.
5. Reflection: In your own words, tell me which one has made more of an impact on the world.
In my opinion, the Current Recession has more of a global impact. The U.S. Dollar is among the strongest currencies in the world, and if that falls then everyone else will feel the change. With the internet becoming more and more used in the world, trading will be affected. Countries are less inclined to invest with the United States and those who have already invested in the United States will see that their investments were a loss. The Great Depression didn't have the exchange velocity that we have today, that's why I believe it doesn't affect the world as much as today's recession.
References:
http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm
http://en.wikipedia.org/wiki/Late-2000s_financial_crisis
http://www.cato.org/pubs/tbb/tbb-0508-25.pdf
http://en.wikipedia.org/wiki/New_Deal
http://en.wikipedia.org/wiki/Great_Depression
Wednesday, June 1, 2011
Friday, May 6, 2011
Chapter 6 - Aggregate Demand
Article: http://www.theglobeandmail.com/news/technology/tech-news/apple-ipad-2-sales-seen-clearing-1-million-units/article1941087/
Summary:
Apple have recently released the iPad 2 and the demand for it have caused it to go out of stock in many electronics retail stores such as the Apple Store, Best Buy, and even Walmart. This is remarkable considering the original iPad only managed to sell one million units after 28 days. Over the weekend it managed to sell nearly one million iPad 2's. Their shares have gone up 0.6 percent even though other technology companies were facing a percentage drop. It also seems like other companies such as Samsung and Motorola have followed Apple's lead and jumped onto the tablet bandwagon. It just proves how powerful Apple's demand factor is.
Connections:
This article relates to this chapter, aggregate demand. Apple's iPad 2 managed to sell such a high number units because of an extremely intelligent marketing scheme, release the exact same product in a new package. People will want to be the first ones to have an iPad 2. The iPad 2 is a slight revamp of the iPad being thinner and having a pair of cameras, how is it that is matches up to the iPad just over the weekend? They hype up the product to sound like a giant step forward from the original iPad. This example extends to their iPhone line as well.
Reflections:
Aggregate demand plays a big role in the economy, it'll simulate the economy or ruin a company. Those companies that can manipulate it will hit gold, such as Apple. People will buy a new product just to be the first on board. The iPad was a home run because everyone seemed to be sporting one such as Kobe Bryant, Justin Bieber, and even that neighbour you hate. Aggregate demand not only simulates the economy but it also is an indicator. People are more inclined to spend if they have more disposable money. The iPad 2 shows that the economy is doing great, again, it sold near one million units on its opening weekend; priced at $500. That says a lot, it proves the powerhouse marketing genius behind Apple.
Summary:
Apple have recently released the iPad 2 and the demand for it have caused it to go out of stock in many electronics retail stores such as the Apple Store, Best Buy, and even Walmart. This is remarkable considering the original iPad only managed to sell one million units after 28 days. Over the weekend it managed to sell nearly one million iPad 2's. Their shares have gone up 0.6 percent even though other technology companies were facing a percentage drop. It also seems like other companies such as Samsung and Motorola have followed Apple's lead and jumped onto the tablet bandwagon. It just proves how powerful Apple's demand factor is.
Connections:
This article relates to this chapter, aggregate demand. Apple's iPad 2 managed to sell such a high number units because of an extremely intelligent marketing scheme, release the exact same product in a new package. People will want to be the first ones to have an iPad 2. The iPad 2 is a slight revamp of the iPad being thinner and having a pair of cameras, how is it that is matches up to the iPad just over the weekend? They hype up the product to sound like a giant step forward from the original iPad. This example extends to their iPhone line as well.
Reflections:
Aggregate demand plays a big role in the economy, it'll simulate the economy or ruin a company. Those companies that can manipulate it will hit gold, such as Apple. People will buy a new product just to be the first on board. The iPad was a home run because everyone seemed to be sporting one such as Kobe Bryant, Justin Bieber, and even that neighbour you hate. Aggregate demand not only simulates the economy but it also is an indicator. People are more inclined to spend if they have more disposable money. The iPad 2 shows that the economy is doing great, again, it sold near one million units on its opening weekend; priced at $500. That says a lot, it proves the powerhouse marketing genius behind Apple.
Wednesday, March 9, 2011
Chapter 5
Chapter 5
Article: http://www.cbc.ca/news/business/story/2011/03/04/f-canadian-food-prices.html
Summary:
This article is about the general price increase within supermarkets. George Weston Ltd., has announced that prices in their products will increase by 5 percent in April 1. This price increase is directly in relation to the inflation of wheat, oil and sugar. In fact, prices are expected to increase by five to seven percent within the next year. This inflation isn't exclusive to Canada though, it is an inflation on the global scale. However, Canadians will have much less to worry about because our dollar is still strong. Lower-income families will ,however, have the biggest impact of all as five to seven percent will be a big chunk of their budget.
Connection:
Price increases in our supermarkets is a cost-push inflation. This is because of the occurring price increases of wheat, sugar, and oil. Its going to cost companies much more money to produce their food products and ship it out, so naturally they're going to have to increase prices in order to make a reasonable profit. The cost of oil is likely to be a result of the Libya crisis, which impacts the everyone around the world and should result in much more cost-push inflation. The food industry won't be the only to suffer from these price increases, so will many other industries. Oil is indeed a valuable asset that affects everything.
Reflection:
Inflation is a good economic indicator, but its not the best. This is because inflation is mostly based on predictions and guesses. It might discourage people from buying goods fearing that it'll increase in price in the future. The inaccuracies of these predictions may actually cause more inflation because people won't be investing in those goods, which will cause chain-reactions to other markets. Prices in oil will affect the food market, you need something to fuel the trucks that are shipping these around, right? Anyways, inflation is better seen as an economic hardship. The worst the increase the harder times will be.
Article: http://www.cbc.ca/news/business/story/2011/03/04/f-canadian-food-prices.html
Summary:
This article is about the general price increase within supermarkets. George Weston Ltd., has announced that prices in their products will increase by 5 percent in April 1. This price increase is directly in relation to the inflation of wheat, oil and sugar. In fact, prices are expected to increase by five to seven percent within the next year. This inflation isn't exclusive to Canada though, it is an inflation on the global scale. However, Canadians will have much less to worry about because our dollar is still strong. Lower-income families will ,however, have the biggest impact of all as five to seven percent will be a big chunk of their budget.
Connection:
Price increases in our supermarkets is a cost-push inflation. This is because of the occurring price increases of wheat, sugar, and oil. Its going to cost companies much more money to produce their food products and ship it out, so naturally they're going to have to increase prices in order to make a reasonable profit. The cost of oil is likely to be a result of the Libya crisis, which impacts the everyone around the world and should result in much more cost-push inflation. The food industry won't be the only to suffer from these price increases, so will many other industries. Oil is indeed a valuable asset that affects everything.
Reflection:
Inflation is a good economic indicator, but its not the best. This is because inflation is mostly based on predictions and guesses. It might discourage people from buying goods fearing that it'll increase in price in the future. The inaccuracies of these predictions may actually cause more inflation because people won't be investing in those goods, which will cause chain-reactions to other markets. Prices in oil will affect the food market, you need something to fuel the trucks that are shipping these around, right? Anyways, inflation is better seen as an economic hardship. The worst the increase the harder times will be.
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