Political Science 2211E Lecture Notes - Wall Street Crash Of 1929, Stock Market Bubble, Business Cycle
20 Mar 2014
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Today"s topics: causes and types of recessions, the great depression, the great recession, the neoliberal-kw debate over the great recession. Central banks maintain a balance between inflation and unemployment. Recession can occur when central bank raises interest rates to fight inflation. Central banks control interest rates; maintain balance between inflation and unemployment. Business cycle either speeds up or slows down depending on whether interest rates are raised or lowered. Lower interest rates = means you pay less for your loans = stimulate economy = people spend more = companies sell more = companies hire more employees = unemployment rates go down. High demand on goods and services = companies increase price = creates inflation = central banks slow down economy by reducing demand by raising interest rates. Central banks are better at targeting interest rates to avoid overshooting. Trying to reduce demand, but sometimes inflation is high that you need recession to slow inflation down and bring it down.
