Class Notes (806,429)
Canada (492,247)
Brock University (11,827)
Economics (195)
ECON 2P19 (11)

Chapter 17.docx

2 Pages
Unlock Document

Brock University
Indra Hardeen

Chapter 17 – The Great Depression, 1929-1939 Economic Collapse • The Canadian economy had a weaknesses of its own, but economic collapse was unavoidable, given events elsewhere in the Atlantic economy • For Canada, as a small open economy, it is not surprising that the collapse of its closest economy had a major impact north of the border • First, why did the U.S. economy experience its downturn in the late 1920s • Second, how were recessions transmitted internationally • The U.S. Depression began with a decline in consumption and ended with an increase in investment • In 1928, the U.S. monetary authority contracted the money supply, thereby increasing interest rates to cool off a booming stock market • Rising interest rates slowed down interest rate sensitive activities like construction and consume spending on durable goods like automobiles or appliances • The Great Depression began in earnest with the U.S. stock market crash in October 1929 • Whereas the loss of wealth, experienced by a minority of Americans in the crash, likely reduced consumption, the bigger effect of the stock market crash was creation of uncertainty in the minds of consumers and owners of firms over future incomes • When the City Bank of the U.S. shut down in December 1930, it marked the greatest bank failure in American history • It was also the beginning of a string of banking crisis that would , within three years, see more than 500 banks close their doors and millions od individuals having their savings wiped out • In response to these financial crises, leading practices by banks became more restrictive, which was yet another channel by which the money supply contracted • Under the gold standard, the values of national currencies were fixed in terms of quantities of gold, and hence against other national currencies • Once the value of a national currency is set, the size of the nation’s money supply is set by quantity of gold reserves held by that nation • A country with a balance payments deficit exports gold, and the money supply contracts • A country with a balance of
More Less

Related notes for ECON 2P19

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.