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Question 1

What is Laissez-Faire Economics?

Answer 1

A government that does not intervene in the market nor lives of people, belief of lack of government intervention.

Question 2

What characterizes Laissez-Faire Economics in the context of capitalism?

Answer 2

A form of capitalism with little to no government intervention, belief that it should be all market run, extremely popular in the US during the Great Depression.

Question 3

What is the belief regarding corporations in Laissez-Faire Economics?

Answer 3

Corporations would automatically help individuals to have a productive and happy workforce.

Example: the roaring 20’s with more worker benefits.

Question 4

What drives economic growth and innovation in Laissez-Faire Economics?

Answer 4

Believes competition drives economic growth and innovation.

Question 5

What is the government’s role in Laissez-Faire Economics?

Answer 5

Views the government’s role as limited to protecting property rights, defending the nation, and maintaining public order.

Question 6

What was Hoover’s belief about the economy?

Answer 6

Hoover/Many at the time believed that the economy couldn’t be controlled because it was so powerful and unpredictable.

Question 7

What did Hoover believe about job loss and poverty?

Answer 7

Hoover believed job loss and poverty was a sign of individual failure, refused to give direct relief.

Question 8

What is Statism?

Answer 8

Calls for a regulatory state that should undertake the supervision of business, almost socialism.

Question 9

What are the characteristics of Statism?

Answer 9

More labor policy and trade practice laws, more equality with corporation regulation.

Example: required pensions.

Question 10

What is Communism according to Karl Marx?

Answer 10

Created by Karl Marx, capitalism will fall through violent revolution to help the power of the working class, no social classes, redistribution of wealth so all are equal.

Question 11

What resources does the state or community own in Communism?

Answer 11

State or community owns resources such as land and businesses.

Question 12

What led to increased demand in the 1920s?

Answer 12

The 1920s technological revolution led to faster and cheaper mass production, prompting companies to raise wages so employees could buy new goods.

Question 13

What was the impact of the 1920s technological revolution on industrial productivity?

Answer 13

Industrial productivity increased by 70% from 1922 to 1928. Unemployment averaged 3.7% and inflation was 1%.

Question 14

What fueled the construction boom in the 1920s?

Answer 14

Urbanization fueled a construction boom, creating job opportunities as new housing, schools, hospitals, and roads were built.

Question 15

What did the American government encourage during WWI regarding agriculture?

Answer 15

A vast increase in agricultural production.

Question 16

What happened to agricultural demand after WWI ended?

Answer 16

The demand decreased after WWI ended in 1918.

Question 17

How did farmers fare during the 1920s?

Answer 17

Farmers struggled with a depression throughout the roaring 1920s.

Question 18

What percentage of employment in the US was in farming in 1929?

Answer 18

¼ of all employment in the US was in farming.

Question 19

What happened to farm mortgages between 1910 and 1920?

Answer 19

Farm mortgages doubled from $3.3 billion to $6.76 billion.

Question 20

What was the economic condition of farmers during the 1920s?

Answer 20

There was so much supply/surplus that prices were very cheap, leading to no opportunity to make money.

Question 21

What structural issue posed a threat to the American economy in the 1920s?

Answer 21

A structural weakness in a quarter of the American economy.

Question 22

What technological change occurred in the 1920s?

Answer 22

A technological revolution increased mechanization, making it faster and cheaper to mass-produce goods.

Question 23

How much did per capita disposable income rise for all Americans between 1920 and 1929?

Answer 23

Per capita disposable income rose by 9 percent.

Question 24

What was the increase in disposable income for the top 1 percent of income recipients during the 1920s?

Answer 24

The top 1 percent enjoyed a 75 percent increase in disposable income.

Question 25

What was the concentration of wealth among the top 5% of earners in the 1920s?

Answer 25

The top 5% of earners had 55% of the wealth.

Question 26

What percentage of national families had no savings in the 1920s?

Answer 26

Nearly 80% of national families had no savings whatsoever.

Question 27

What was notable about wealth concentration in the late 1920s?

Answer 27

It had the highest concentration of wealth at any time in American history.

Question 28

How did wages compare to productivity increases in the 1920s?

Answer 28

Wages were increasing ¾ as fast as the rise in productivity.

Question 29

What was the impact of income distribution on consumer behavior in the 1920s?

Answer 29

The wealthy had money to buy goods, while the working classes borrowed money to buy goods, known as buying on credit.

Question 30

What was the consequence of increased debt among the working classes?

Answer 30

It led to decreased demand for goods after the 1920s.

Question 31

What was buying on credit in the 1920s?

Answer 31

Buying on credit was when the wealthy had money to buy goods, while the working classes borrowed money to buy goods.

Question 32

What happened when people couldn't pay off their debts?

Answer 32

When people couldn't pay off their debts, banks failed.

Question 33

How did the wealthy and working classes differ in their spending?

Answer 33

Rich people could spend a smaller portion of their income on large stuff, while most had to borrow.

Question 34

What items could be purchased on easy monthly payments?

Answer 34

Cars, appliances, radios, furniture, and other expensive items could be purchased on easy monthly payments.

Question 35

What was the impact of installment payments on consumers?

Answer 35

Installment payments allowed consumers to buy goods and pay for them a little at a time over a period of months or years.

Question 36

What was the effect of increased consumption in the 1920s?

Answer 36

Increased consumption led to inflated demand and an inflated economy.

Question 37

What happened to those carrying installment debt?

Answer 37

Those carrying installment debt could no longer use their salary for new buying.

Question 38

What was the consequence of reduced purchasing power?

Answer 38

There was a reduction in purchasing, leading to increasing unemployment.

Question 39

What characterized the bull market in the 1920s?

Answer 39

The bull market was characterized by the belief that prices would continue to rise.

Question 40

What was the issue with stock quality during the 1920s?

Answer 40

Nobody cared about the quality or true value of a stock.

Question 41

What did banks believe about loans in the 1920s?

Answer 41

Banks believed the loans from buying on credit would be worth billions, despite being made to people with limited ability to repay.

Question 42

What is borrowing on margin?

Answer 42

Borrowing on margin is a risky method where investors could borrow against future stock profits using the stock as collateral.

Question 43

What was the effect of borrowing on margin?

Answer 43

It made wins better and losses worse, creating a bubble in the banking industry.

Question 44

What does a company's stock reflect?

Answer 44

A company's stock reflects the value of the company, related to its profits.

Question 45

What happens to stock value when a company makes more or less profit?

Answer 45

If a company makes more profit, the stock value should rise; if it makes less profit, the stock value should fall.

Question 46

What does it mean if a stock price continues to rise despite falling profits?

Answer 46

If a stock price continues to rise while profits fall, then the stock is overvalued.

Question 47

What happens when the wealthy have all they want and others are in debt?

Answer 47

Demand for products begins to fall.

Question 48

What is overproduction?

Answer 48

Overproduction occurs when the supply of a good exceeds demand for it.

Question 49

What happens if a company has produced more than it can sell?

Answer 49

The company will reduce the amount of goods it produces.

Question 50

What is the consequence of a company producing fewer goods?

Answer 50

The company will fire or lay off workers.

Question 51

What happens when workers are fired from their jobs?

Answer 51

They no longer have money to pay back the loans they borrowed to buy things on credit, leading them to default on those loans.

Question 52

What did large investors realize by October 1929?

Answer 52

Many large investors realized that stocks were overvalued.

Question 53

What triggered the panic among investors in 1929?

Answer 53

Large investors began selling off shares due to weakened demand for industrial goods.

Question 54

What happens to banks when people default on loans?

Answer 54

Banks lose money and if they lose too much, they go bankrupt.

Question 55

What was a significant issue for banks during this time?

Answer 55

Lack of federal insurance for bank deposits.

Question 56

What was Herbert Hoover's belief regarding government intervention?

Answer 56

He believed in voluntarism and that the government should not intervene.

Question 57

What was Hoover's response to states' requests for unemployment relief?

Answer 57

He refused to provide the large sum requested and only gave 25 million, specifying that none of it could go towards food.

Question 58

What was Hoover's basic concept regarding government action?

Answer 58

To utilize the government as a catalyst for voluntary cooperative action in the private sector.

Question 59

What was the purpose of the Federal Farm Board created in 1929?

Answer 59

The board bought surplus crops and held them to reduce surplus and raise crop prices.

Question 60

What was a consequence of the Federal Farm Board's actions?

Answer 60

Many farmers planted more crops and sold them to the US government.

Question 61

What was the financial outcome for the Federal Farm Board?

Answer 61

The FFB wound up with losses of $184 million.

Question 62

What happened to gross farm income during this period?

Answer 62

Gross farm income fell from $12 billion to $5 billion.

Question 63

What was the goal of the Hawley Smoot Tariff enacted in 1930?

Answer 63

To lessen European imports by applying a tariff to encourage domestic production.

Question 64

What was a negative effect of the Hawley Smoot Tariff?

Answer 64

It made goods more expensive for everyone.

Question 65

What was the impact of retaliatory tariffs from Europe?

Answer 65

It hurt the US economy as they relied on foreign goods, worsening the economic situation.

Question 66

By what percentage did foreign trade decrease due to the tariffs?

Answer 66

Foreign trade went down by 50%.

Question 67

What was the goal of the Emergency Relief and Construction Act of 1932?

Answer 67

To provide jobs by giving money to states for income-producing public works.

Question 68

Why was the Emergency Relief and Construction Act ineffective?

Answer 68

The money and jobs were never given out because they were based on 'absolute need.'

Question 69

What was the status of banks by 1933?

Answer 69

More than 11,000 of the nation's 25,000 banks had collapsed.

Question 70

Why are banks important to the economy?

Answer 70

Banks facilitate investments and savings.

Question 71

What did Hoover ask the big banks to do?

Answer 71

He asked them to help the small weak banks.

Question 72

What was the response of the big banks to Hoover's request?

Answer 72

They refused, and there was no government compulsion.

Question 73

Unemployment only rose until its peak in 1933 (25%)

Answer 73

Early 1933 was when Hoover left the presidency