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Ebook Survey of economics (8th edition): Part 2

(BQ) Part 2 book "Survey of economics" has contents: Fiscal policy, federal deficits, surpluses, and the national debt, money creation, monetary policy, money and the federal reserve system, international trade and finance, economies in transition, growth and the less developed countries,and other contents. | CHA www.downloadslide.com PTER 14 Aggregate Demand and Supply © Colossus RM/MediaBakery C H A P T E R PR E V I E W In to ● ● ● In U.S. history, the 1920s are known as the Roaring Twenties. New industries blossomed, including automobiles, public power, radio, and motion pictures. It was a time of optimism and prosperity. The spirit of the times was captured in the lyrics of a popular song of the day, “Nothing but blue skies do I see Nothing but blue skies from now on.” Between 1920 and 1929, real GDP rose by about 40 percent. Stock prices soared year after year, and many investors became rich. As business boomed, companies invested in new factories, and the U.S. economy was a job-creating machine. Then, in the early 1930s, the business cycle took an abrupt downturn, and unemployed men fought over jobs, sold apples on the corner to survive, and walked the streets in bewilderment. The misery of the Great Depression created a revolution in economic thought. Prior to the Great Depression, the classical economists introduced in this chapter recognized that over the years business cycles would interrupt the nation’s prosperity, but this chapter, you will learn they believed these episodes would be temporary. They solve these economics puzzles: argued that in a short time the price system would automatically restore an economy in depression to full Why does the aggregate supply employment without government intervention. curve have three different segments? What was wrong? Why didn’t the economy of the Would the greenhouse effect cause 1930s self-correct to the full-employment level of real inflation, unemployment, or both? GDP? The stage was set for a new theory offered by Was John Maynard Keynes’s British economist John Maynard Keynes (pronounced prescription for the Great Depression right? “canes”). Keynes argued that the economy was not self-correcting and, therefore, could indeed remain below full employment indefinitely because .