Course title: Macro Economics

Course Code: MBA 515/305

Submitted to: Jillur Rahim
Date of submission: 6th September,2020
 Group Members
Name ID
Farah Tabassum 192051027
Nasrin Akter 193051056
Sumit Sur Roy 193051035
 Introduction

 Great Recession was precipitated in the United states by

the financial crisis of 2007-2008 and quickly spread to other
countries and lasting until mid-2009, it was the longest and
deepest economic downturn in many countries.

 Great Depression was a severe worldwide economic

depression .It started in 1929 and lasted until the late 1930s. It
was the longest, deepest, and most widespread depression of the
20th century.
Great Depression,1929
 Background

 Severe economic depression which preceded World War II.

 Started in the US on October 29th,1929 with the fall of US
stock market.
 Impacted the major European and Asian economies of the
world.
 Lasted till early 1940’s-longest,most widespread and deepest
depression of 20th century.
 Major Causes

High Tariff
Barriers

Monetary Stock
Policy Market
Great Crash
Depression

Over
Inequality Production
Over Production
o Farm
 The production rose to very high level to meet the demand
during WW-I but the consumption dropped in 1902’s.
 The prices of the land and crops fell and the average annual
income of farmers dropped to $273.
 30% of Americans were dependent on farming
o Industry
 Factories were producing products at a higher rate but the
wages of workers were not increasing in the same proportion.
 Consumers were buying less than their consumption and their
was over production.
Monetary Policy

 Monetary contraction , the consequence of poor policy-making

by the American Federal Reserve System and continued crisis
in the banking system responsible for Great Depression.
 The Federal Reserve ,by not acting, allowed the money supply
to shrink by one-third, transforming a normal recession to
great recession.
 Led to closure more than 11000 banks and increased
conservatism in remaining banks in extending credit.
Stock Market Crash
 The American stock market were the most visible symbol of
prosperous American economy in 1920’s.

 Stock prices rose steadily in 1920’s and in 1929 Dow peaked at

its highest level of 381 points.

 The industries were not performing well and in the stock

market there were 2 major problems: Speculation & Margin.

 On October 29th,1929 the stock market plummeted leading to a

loss of $30 billion
Inequality: Unequal distribution of Wealth
 Nation’s wealth grew steadily in 1920’s but it was not
distributed evenly.
 The income rose to 75% for the top 1% and for the
remaining it was only 9%.
 80% of Americans had no savings at all
 70% of families had annual earning <$2500
High Trade Barrier

 During initial stages of Great Depression, the USA’s main goal

emerged to protect American jobs and farmers from foreign
competition.
 So, the Smoot-Hawley Tariff Act was enacted in 1930.
 But it led to the worsening of depression by reducing international
trade and causing retaliatory tariffs in other countries.
 Recovery from Great Depression

 President Franklin D. Roosevelt programs- He provided dynamic

leadership in a time of crisis;
 Address to nation;
 In March 1933, the country was virtually leadership;
 The banking system had collapsed;
 Serious of economic programs enacted in the USA between 1933 and
1936.
 3R’s- Relief, Recovery ,Reform
 Relief for the unemployment and poor
 Recovery of the economy to normal levels
 Reform of the financial system to prevent a repeat depression.
Sources of New Deal
 specialists and experts, mostly college professors, idea men
 New Economists: Here government spending deficit
spending and public works, government should prime
economic pump.
 Roosevelt Cabinet: It included conservatives, liberals,
Democrats, Republicans, inflationist's, anti-inflationist
often conflicting, compromising, blending ideas.
First New Deal (1933-1934)
 Primary Aim of this Deal was to Achieve Economic Recovery;
 Philosophy: economic nationalism and economic scarcity (i.e.,
raise prices by creating the illusion of scarcity)
 Objectives: higher prices for agriculture and business
 Beneficiaries: big business and agricultural business.
Some projects of New Deal

• Federal Emergency Relief Admin

• National Recovery Act ( NRA)
• Income and Wealth Taxes
• Govt. Economy Act
• Glass Steal Act
• Tennessee valley Authority Act ( TVA)
• Reconstruction Finance Corporation
• First Agricultural Adjustment Act (AAA)
• Civilian Conservation Corp (CCC)
 Second Ne w Deal:(1934- 1941)
 Primary aim: Permanentreform;
 Philosophy: International economiccooperation and economic
abundance;
 Objectives:Increased purchasing power and social security for public
 Beneficiaries: Small farmers and labor
Some projects of Second New Deal

 Social Security Act

 National Labor Relations Act
 U.S Housing Authority
 Second Agricultural Adjustment Act
 Physical Rehabilitation of Country
 Human Rehabilitation
The Ended of Great Depression

 The great depression ended when the U.S entered

World War II in December 1941
 Massive war spending doubled the GNP
 Military Keynesianism brought full employment
Graphical Illustration of The Great
Depression
Great Recession,2007-2009
 Great Recession (2007-2009)

 Recession is a phase in business cycle .In 2008 it was the worst global
recession since WW2.
 The year lending up to crisis were characterized by a boom in
economic demand, but suddenly, many large and well established
investment and commercial banks in United states and Europe
suffered huge losses and bankruptcy.
 The global recession that followed resulted in a sharp drop in
international trade, rising unemployment, and failing commodity
price.
Major Causes

 Credit crunch led to a fall in bank lending, due to a

shortage of liquidity.
 Fall in consumer and business confidence resulting from
the financial instability.
 Fall in exports from the global recession.
 Fall in house prices leading to negative wealth effects.
 Fiscal austerity compounded the initial fall in GDP.
 In Europe, the single currency created additional problems
because of over-valued exchange rates, and high bond
yields.
Continue…
 The Housing Bubble Burst
 The subprime mortgage fiasco
 Sky-high price of crude oil and refined products
 Dollar Devaluation
 Corruption
 Unlimited supply of credit
 Recovery from Great Recession
 It recovered as the flood of liquidity washed over wall street first and
foremost.
 FED lowered a key interest rate nearly zero to promote liquidity.
 Provided banks with staggering $7.7 trillion of emergency loans in policy
known as Quantitative Easing.
 Beside, US federal govt. embarked on a massive program of fiscal policy.
 Tried to stimulate the economy with deficit of $787 billion spending
under the American Recovery and Reinvestment ACT.
 The Dodd-Frank Act: In 2010, president Barak Obama signed the Dodd-
Frank Act to give the government expanded regulatory power over the
financial sector.
Following this policies though there are some arguments over it, but the
economy gradually recovered.
Graphical Illustration of Both Financial Crisis
 Conclusion

The Great Recession occurred in the late 2000s and early 2010, the
Great Depression occurred in the 1930s. Both financial crisis had a
great impact on the world economy. However, many countries
recovered from it gradually.
Thank you