ECON 2513 Chapter Notes - Chapter 5: Smoot, International Trade, Money Supply
17 Oct 2018
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Document Summary
Domestic explanations focus on the causes of severe decline in us economic activity following business cycle peak of 1929. Domestic- real: investment consumption, monetary post 1929 and pre 1929. International- trade warfare; smoot hawley and retaliation, monetary system, competitive depreciation, reserves: maldistribution and liquidation. Unusual decline in consumption spending in 1929 initiated contraction. Other strand of domestic explanation focuses on monetary forces. Unpreceded contraction of us money supply emphasising role of bank failure in initiating contraction and role of policy failure in failing to prevent them. First wave of bank failures did not occur until end on 1930,cannot explain the timing and severity of 1929 downturn. Second variant of monetary explanation focuses on monetary stringency in us during period preceding 1929 peak. Adopting restrictive anti-speculative monetary stance, with demand for money maintained by sustained expansion of real economy and by volume of transactions on stock market.
