The Brief Basics of

Macroeconomics
By: Megan Melvin

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 Table of Contents:
Page 3: Dedication
Page 4: Introduction
Page 5: Principals of Economics
Page 7: The Economy from a Global View
Page 8: Synopsis 3
Page 9: Measuring Economic Growth
Page 10: Law of Supply and Demand
Page 11: The Rich Middle East
Page 12: False
Page 13: A.K.A. Economics
Page 14: Theories
Page 15: Knickerbockers’
Page 16: The Basics Of Money
Page 17: Inflation
Page 18: Aggregate Supply and Aggregate Demand
Page 19: Spend and Prosper
Page 20: profit and Interest
Page 21: Fiscal Policy
Page 22: Monetary Policy
Page 23: The Federal Reserves Tasks
Page 24: International Trade
Page 25: America
Page 27: Cash$

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 This book is dedicated
to:
I dedicate this book to my mom, Kimberly Augenstein,
for all her love and support. With out her constant push to
get the best out of life I wouldn’t be here. She always
believes in me and is very proud of the person I have
become. For that there aren’t enough thanks in the world to
give to her. I love her very much. Thank you mom for
everything you’ve given to me. I love you.

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This book is authored by Megan Melvin, who has been a student of mine in
“Introduction to Microeconomics”, spring 2006. The reasons for this assignment are:
Learning is a “Cumulative” procedure. The students learn a little bit every day,
without noticing that they are accumulating the knowledge. Many times, in my
professional life, I have been approached by my students who frequently claim:
“I have not learned anything in this course!” Putting the accumulated knowledge
in writing brings to the students’ attention the enormous amount of knowledge
that they have gradually acquired.
It is a matter of the fact that in our country, the students are not learning the
basic tools for their success; especially at high school level. They learn
“Everything” except how to read, how to listen, how to write, and how to
calculate! That is why I have chosen these skills as my curricula’s core
competencies. Authoring this book improves the first three above mentioned
communication skill of my students.
To further improve the communication abilities of my students, they are taught
how to build a web-site and enrich it with their accumulated knowledge. You
may visit Megan Melvin web-site at:
WWW.Geocities.com/mmelvinfall06/mm1.html
This book, undoubtedly, is not a perfect book in economics. It is, hopefully, the “First
Try” in a series of books published by Name in the future. It is a pleasure for me to
hear about the future published scientific works of Name. This will give me the
satisfaction to claim that I was the one who taught him/her how to improve his/her
communication skills at first place.

Bijan Moeinian, Doctor es Sciences Economiques.

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Principals of economics part 1:
Not enough of anything. Scarcity is one of the main reasons why we study economics today.
To choose between what people want and what to buy is called allocation. Economics is the study of how
societies use resources available today.

Economists believe every part of life is involved with some type of economic decisions. On a daily basis we use
tradeoffs. It’s a daily decision that no matter who you are young or old will make. That decision is deciding
between work and leisure, and buying one good or another.

Prioritizing, something that our government has to do on a daily basis. They have to choose between what
they think is good for our country and what they think is good for us. One thing they have to allocate is
between guns and butter. We have to prioritize what we want as well take the planet we live on for example.
We all want clean air and less smog but clean air is a tradeoff for loss of jobs and livelihood.

The cost of something is what you give up to get it. You give up spending your money on a fun night out or
clothing for cost of tuition and books. The full opportunity cost is what you completely give up to do that. A
college students full opportunity cost is low because of their jobs are low paying jobs. Athletes that make
millions to play professionally have high opportunity cost because in order to college they would have to give it
all up.

Thinking at the Margin. Adjust ones schedule according to amount of time he/she has. If they have not a lot
of school work they can increase their hours outside of school.
Lots of school work one will have to cut back hours outside of school.
One should always know where their margin lies. For a Broadway show 3/4 tickets sold need to sell 1/4
discount 1/4 to get profit and sell tickets.

People respond to incentives. Incentives are cost and benefits that one receives for a certain behavior. Ones
behavior may change when cost and benefits change. One incentive would be to wash a friends car and I could
use it tonight. A disincentive would be washing my car and ill cut your allowance. Discount signs in store
windows are incentives to people. Clinton and other congress upped price of cigarettes to stop teens from
smoking, as a disincentive.

A Incentive that back fired that they did not intend was, Safety belts. People drive worse because they feel
safer and because of that more accidents are caused. Retirement is another example of this provided that
people save less on their own. Trade can make people better off.
Those that Specialize are those who are excellent at one particular skill. People rely on other people to do
tasks for them. In trade people exchange things assuming that that exchange will make each party better off. In
the Food market, farmers produce food and sell it to other markets, both being better off because of it. Due to
our fast changing world it has expanded boundaries of trade. All these things making all parties involved better
off.
Labor intensive countries exports to us and imports higher tech things such as airplanesmarkets good way

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to organize economic activity. Mexico makes us makes airplanes. Our system is a market economy. Firms
decide what to make and who to hire. Households decide where to work and how to spend income; this is also
the Circular Flow Model (figure 1.1.).

Provided by:
http://www.columbia.edu/itc/economics/weissman/u4595/lectures/lecture13/dcflowmodel.jpg

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 The Economy from a Global View
Twenty percent of global production is from the activities of multinational companies, a company
that has production facilities all over the world, about one quarter of all trade is between international
subsidiaries, and about a half of imports are from similar multinational companies. The sales of some
international companies are larger than the gross national product of other countries. Multinational Companies
have gone from being vertical in structure, meaning, all the main activities take place at a central location
while the many branches are still all over the world. A more modern approach is to divide the activities among
the various branches of the company around the world in order to be independent, or what is known as
horizontally integrated. Buying or building a subsidiary are the global methods that are true international
approaches. The company that produce the product themselves in various countries are really “International”,
is the main difference.
A few advantages of this is, better protection of proprietary technology, location considerations, such as
transportation cost, labor and materials cost, overcoming protectionism, favorable tax environment, and taking
into consideration the consumers’ preference for home products.
In underdeveloped countries sometimes the influence of a large multinational is unwanted. Sometimes,
however; it can be to their benefit to host some foreign companies. Obviously if they were used or exploited it
would not be a benefit. If the Gross National Product is less than the total profit of the company then an
unfair influence can take place. A lot of times the source country has problems with the export of jobs over
seas, the export of technology, and loss of tax revenues. The effects that take place in the host country are job
creation, technology inflow, loss of control, and fear of exploitation. Some companies bring technology to
countries that would not otherwise have.
What determines a company’s nationality?

Job placement

Management

Ownership

Where research and development take place

Reasons why corporate ownership is not important.
Ownership and control are not very important
Work force skills and training are critical
Acquisitions of new technologies improves competitiveness.
Reasons why corporate ownership is important
Best interests of the country
Foreign companies favor their own countries suppliers
They can compete with us but we cannot compete with them
National security
Reasons why international companies choose to do business in other countries
Economies of Scale
Rationalized production
Exchange rate volatility

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 Synopsis3-
1979- Gas lines congress argued over Alaskan land. 1939 1 in 6 Americans were out of jobs and in 1942 after
starting the second world war Americans were living better than ever. They started to be able to produce both
enough guns and enough to supply to Americans needs. Congress had to choose between people and their lives
or jobs and profits.

We always face choices. The Government had to choose Resources versus scarcity. What is economics all
about? Theory and reality and how people and events changed economics. Trade offs. One hundred million in
Alaska as wilderness parks and nature reserves. How did this effect nation? Waste of money. Now wanted to
get oil from Alaska. Over seas cut off oil to Americans. Chose to cut off wilderness and change into mineral
resources. Alaskan congressmen were upset. Unknown how much resources was in there. The wilderness was
vast and last home to species in America. Government had to choose between wilderness and resources.

5/16/1979 Alaskan protection was put into a bill! But, because of this people were loosing money, and jobs.
Issue of limits. What is the value to society of protecting our wilderness? Can't have everything we want. Wants
are limited but our resources to fulfill those needs and wants are not.

If you want more minerals we would have to give up more of our wilderness. More wildernesses less money in
minerals. This is calling the P.P.C. (Production Possibilities Curve) it expresses the possibilities that really lay
before us.

The 30's were not easy. The great depression which came after the stock market fall of 1929. It was a blow to
national confidence, smart workers, best factories, unlimited resources, and, unlimited farms and crops of the
time. The country was in parish. Banking was in panic, labor in despair, Industry was in collapse, and
agriculture was in ruins. 15-30 million unemployed out of a working force of 46 million people. People was
wondering how long it would last. Fathers and parents couldn't meet the need of their children.

World war two began and America didn't want anything to do with it however; allies needed our resources and
we wondered how would we help? Needed more aluminum and steel. Steel was at an all-time low and the steel
factories questioned the Government. However; when the war began and Americans were willing to help the
factories was working double time? New factories had to be built creating new jobs. This was the beginning of
America rebuilding its fallen economy. Americans left to go over seas and fight. Still the economy continued to
grow. Women began to work and so did the elderly. Production was higher in 44 then in 39. Demand for
consumer goods, grew with the economy because now things were affordable. The country was producing and
consuming more than before and was able to increase equal production of all things. This changed because
choices eventually had to be made. No more new automobiles were able to be produced. The auto companies
began to switch to military needs and things started to ration. Gas
butter, tires and many other things started to dwindle in availability. Mild compared to the depression and
people were thankful to say the least.

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 Measuring Economic Growth

The combined value of all goods and services result in the gross domestic product. The rate at which
the GDP changes is an indicator of how the economy as a whole is doing. The end sum is shows the
relationship of consumers, markets, Government, and international markets.

Supply and Demand which comes first? A question that comes from that is, do consumers creates supply by
demanding goods or do businesses create demand by supplying goods and services. The answer is both.
Households around the nation own resources that help businesses create goods and services. Those resources
are land, labor, capital, and income. Households offer resources or factors of production to businesses for a
price. Households supply resources to input markets that businesses demand those resources to supply goods
and services to output markets that households in turn demand. It’s a never ending circle.
Another circle in economics is that of the almighty dollar. Households pay for their demand of goods and
services to businesses. Businesses then take that dollar and use it to pay for the resources that they get from
households which in turn give households incomes.

Gross Domestic Product is consumption, Investments, Government spending, and Net exports all
combined. Consumption one of the major attributes to GDP is when the consumer, consumes (buys), goods
and services. Investment is all capital goods used in making other goods. It can also be changes in inventory.
Spending by the government make up 20% of all Gross domestic products. The government buys things like
weapons and public schools. Net Exports or foreign trade, Food, technology, medicine and entertainment as
well as many other things are wanted from around the world. America gets Italian clothing, French wine,
Chinese TV, and Japanese cars. Negative exports equal a deficit.

It can be difficult to get an accurate Gross Domestic Product because there are people to don't report all
they earn to the IRS. If someone wins a bet most likely they will not report it. Illegal prostitutes and drug
dealers do not there earned money. Those who gamble or bet on horses also will not report there earnings that
are under 600 dollars. Those who earn cash don't report those earnings. When someone does things for them
that could be bought but are done by them selves. Should pollution clean up be counted for?

Gross Domestic Product suggests the quality of life lived by that country. Although; it does not take into
count leisure time, household projects, pollution etc. It only measures the production of products. If
production around the country increases so does pollution. That does not make for a good quality of life. It
does measure the efforts to decrease pollution caused by production. This makes the economy look pure. It
looks at distribution and income of a country. Two could have the same real GDP but one might not be as well
off as the other. GDP only looks at the aggregate income not the disparity. Sweden is the best of both worlds;
it has a high GDP but also high social interest, low stress, good environment values. India lies at other end. It
has a low GDP. In the end GDP is the measure of one society’s measure of standard living.

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 The law of Supply and Demand
1974 cali water = cheap 77 = drought 73 after Israel and Arab war oil was dry Designer jeans pay a lot for so
little Supply and demand what sets the price?

Rare that we worry about water. Tons and its cheap Drought in Cali with large agricultural population No rain
or snow in winter caused problems Fires in summer of 76
Continued the next winter levels were way down Cali was running out of water Maron county each resident was
cut back by 46 gallons a day that’s Two thirds less Gave people choice on how to use water depending On num
of people in house hold Reduced water use by 66%

Willing to pay way more than usual price Dug their own wells Conservation Bond issues in 76 and 78 to pay for
water A lot of money 78 rain marked end of drought Consumption climbed back to where it had been before
the drought. Learn to use it less wastefully
Law of Diminishing Marginal Utility High marginal utility when drought is high and less water When drought
eases up the utility is less and there is more water available
Why we pay high price when there is low amount and only pay low price when abundant
=demand side

Oil from over sees was tight because of Opeck and war. America was highly dependant on oil from over sees.
Shook America because of shortage As inflation increased 65 the price of oil decreased reducing and
purchasing power need to drill in us American oil industry price sealing’s were issued by Nixon Control of
price in a high risk industry will ruin that industry and that’s what they were doing Oil prices were doubled by
big producers on Persian gulf
As well as other the world New oil found after 72 was free to follow world oil price
72 40-60% oil was trapped between rock wells. Stifled shortly after by Nixon This made the us even more
dependant on world oil from over seas Iran curtailed oil because of political up roar they were having This
made American oil prices rise even higher.

Consumers were back in energy crisis. Long lines at gas stations Cater announced eventually letting control of
oil go. Drilling shortly began back in the U.S many producers were back when promise of profits returned to
the industry. Suppliers won there gamble because profit was there to be made When profits soared producers
began to drill even more Soon there was a gulch 85 price had plummeted

High oil prices people began to find ways to use less oil As price went up people economized on expensive oil
Producers went on search for new oil It was expensive and risky Requiring a promise of higher profits from
consumers purchases High prices = higher profits High price the more producers will bring When demand
goes down the supply goes up That is the Law of supply and demand.

Always want what is pop of the time Designer jeans People wanted the jeans that were double the reg. price of
plain jeans Went straight to consumer then consumers created a gigantic demand Became a universal product
because of ok to were jeans on a regular basis Designer jeans really advertised on jeans and billboards to get
consumers to get demand $ put tons of money into ads More and more designers got into the designer jean
industry Market got over down because everyone got to wear them So they lost there status in society.

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 The Rich Middle East

America gets there oil from the Middle East and since they continue to raise the price of there oil it
cause a lot of problems and America feels as though they have the right to do something about it. The Middle
East is rich with oil. In some cities it comes up through the cracks of the ground. Those who are angry or upset
at the Middle East’s decision to raise prices believe that it is not fair. Those people believe that if it wasn't for
us and other western countries they wouldn't know how to get it or perhaps its worth and value. The use of oil
however; has been passed down from generation to generation, from country to country and used for similar
uses as we use it today.
British government needs the oil to power their elite of ships and couldn't get it from other western
countries where they had been looking for cheep oil so they looked to the Middle East. When they got over to
the Middle East and began looking at the resources they had to off they realized the richness of it in the ground
they had walked on. Here’s a little fun fact over half of the worlds oil resources come from the Middle East.
For the most part the profits made of the Middle East’s oil went to none other than oil companies in western
countries. That has begun to dwindle since the mid century.

The reason so much of our oil comes from the Middle East is because its cheep for us to purchase and
its widely available. It had always been rather low that is until America and other western countries needed
more and more. If these countries are purchasing more and more oil then why not raise the prices to make
more money for them selves? So the prices went up, just as anyone or any country would have done. Oil
companies do not work on complete greed and selfishness. They give a percent of each profit to other third
world countries. Western countries should not be angry with the Middle Easterners. That’s simply how they
make their money, its a business. The Middle East is so rich in the vast flow of oil but, they do not use it for
their own country they simply sell it to those with the technological means to use it.

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 “False"
In America we have one of the best standards of living anyone could ever ask for. We never thought
that a great depression or anything like it could ever happen to us. Someone that agreed with this was the
economist Jean-Baptiste say. Up till world war one he had never been proven wrong. America was down in a
rescission and just as world war one involved America it had created a demand that help to widen our
economy. It was an easy way out for the American government and economy. This new found easy way out
provided many benefits to the American economy. These were all good things to come out of such a negative
thing in the American citizen’s eyes. But, one might say that war was Americas "one up." By that I mean, if
you've ever played old school Mario before you have collect all those coins to get and extra life. That’s just
what America did. It got all that demand from the war and gave itself an extra life.

Towards the wars closing workers had good pay and plenty of unions were supported by the
government. But, when it was all said and done it didn't look so prosperous. The demand that started with the
war ended with the war. Once soldiers returned to civilian life unemployment rates plummeted. The
government that supported work unions went back on that and wages and benefits of workers began to not be
so great as they had been due to the war. The theory of Jean-Baptiste Say, America will always fix itself, was
soon proven false. It was the dark cloud that had been hanging over the economy that decides to open and let
it pour. Businesses weren't doing so good, workers were slowly being laid off more and more, and not last but
least banks were falling apart left and right. All of this led to the inevitable. When more and more people kept
getting laid off families didn't bring in the bread to purchase the butter from others. The loss of purchasing
demand made less supply which kept the cycle going in a downward spiral.

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 A.K.A. Economics
Expansion and contraction the rhythms’ of the economy are irregular
when the economy contracts output is decreasing and employment is declined when there is an expansion the
economy employment and output increase this is when we see a inflation start to occur. It causes the ups and
downside any cycle the pattern repeats it’s self over and over again although no two cycles are the same. When
the gross domestic product has fallen for two consecutive times this is a recession trough is where the curves
and starts to go back up into the recovery period. Expansion, full employment, high employment, maximum
output and inflation start to occur. Then it reaches a peak where things begin to fall back down into recession
all over again.

Length and extremes of cycle vary and depend on not just the economy but things like wars and hurricanes as
well. Interest rates and government spending within the economy take affect as well. In the 1st years within the
20th century the us had a period of prosperity then a brief recession and a boom by war then after the war the
country fell into a deep yet short recession. Recovery was brought about by electricity and production of cars.
The stock market crash, bank failures, and a drought led to what we know as the Great depression. It wasn't
into the late thirties that they us allied countries over seas in world war two that we began to see a lift on the
depression. The baby boom in the 50's led to the need for more suburban houses and in turn led to the selling
of more cars. in the 60s was back in recession, then with a tax cut we had a large expansion that led to inflation,
and a giant price increase. In the 70s many women began to join the workforce which helped.

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Theories

Loss of jobs creates loss of income, confidence, and increased stress. The same for inflation it causes
anxiety loss of buying power and diminished confidence. Long debate over economic instability. Lots of
theories were thought of and created. Theories have been both right and wrong about the problems that leave
unemployment and inflation.

The earliest known theories are that of Adam smith. Classical economics was the theory he created. Its
thesis is that the economy will fix itself. That if we leave inflation and unemployment alone the economy will
on its own go back to equilibrium. Factors that make it possible for the economy to correct itself are flexible
wages, interest, prices that in turn affect the short term aggregate supply curve. Until the great depression the
theories had not been thought wrong, however the great depression tested the theories. 3-25% was how much
the economy went up. And the G.D.P was down thirty percent.

A guy by then name of jean Keynes came up with a new theory. It said a nation should and could be
manipulated to regain economic stability. The basic idea behind his theory is when an economy enters a
recession the prices and wages will not bring an economy back to where it needs to be. Focus on aggregate
demands and fluctuations. The great depression began with uncertainty of the economy which led to stock
market crash led to less investment less consumption. He believed the U.S could get out of the depression by
utilizing expansionary policy. He was more comfortable with fiscal policy than monetary policy. He sent a letter
to the president Roosevelt but he didn't listen and brought prices and wages up which only made the situation
worse. As we all know by now the world war two brought the U.S back to economic equilibrium. It brought an
increase in aggregate demand and that was what Keynes was saying that we needed all along. After the
government and America saw the light Keynes' theory became the theory used for the next thirty years.

Although Keynes was the top theory over the next thirty years not everyone agreed with his theory.
There was the monetarists, and they said that the federalist monetary policy as the blame. Their standpoint on
the depression it was simply the feds fault because they could not control the money supply. Meldon
Freedman, A.K.A the father of the monetary theory, called it the great contraction. One reason for the loss of
money supply is because the fed being rather new wouldn't account for liquidity. They failed to do it even
when banks asked them to. When banks were in a panic and everyone started to withdraw there money the fed
didn't do their job of supporting the banks and lending reserves. Some say the fed didn't help the banks
because they said banks were poorly managed others say that the fed was fairly new and didn't know what type
of supplies they had at there fingertips. Instead of making cash available to banks they increased the
requirements for reserves. This made the banks have fewer reserves to loan out and increased the loss.

The new classicalist they pointed to the development that shifted the economies production function
downward and created a down shift in aggregate supply. 1/3 of the banks went out of business and the drought
in the west. The new deal policies kept the economy from going back to equilibrium. They agreed that the war
helped the U.S come out of the depression. but they said something different then Keynes they said that it was
because the increase productivity, made the production function go up and shifted the increased aggregate
supply and moved it to the right. In turn this helped in lifting the depression according to the new classical
theorist. Now people agreed that the government did have to help either monetary or fiscal in order for the
economy to go back to its state before the depression. This remained popular throughout the rest of the
century.
It wasn't until Kennedy that the Keynes theory was set into place. That’s when the Phillips curve was
created. It tells us that there is a negative relation ship between the inflation rate and the unemployment rate.
When one goes up, the other will go down. The tax cut that Kennedy did was supposed to bring the U.S to full
employment. In Keynesian message this is what he said was most important. Up till the 60's they could point to

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some impressive achievements by the theory. The theory eventually got burnt out and it was time for a new one
to be put into place.
Knickerbockers’
The knickerbockers’ bank closes in New York 1907. The 4day bank holiday. Cost the nation 1/2
trillion dollars. Never eliminated all the risks. The banking system. Banks provide growth and success for
businesses and families. Most banks are around for a long time but some fail. When banks fail it’s a
catastrophe. New York at the time was the nation’s money maker. It had hundreds of banks that provided
wealth to the nation’s economy. Knickerbockers’ held storekeepers, wealthy, working class, cooperate. It held
only fraction. Lender out money.

Banks make money by loans and investments. It didn’t have a very good government leadership.
Charles Barney was the pres. Ambitious he wanted to make money so he took some risks. He was with Morse
to manipulate the price of copper. IT was a hot item. He was behind the scenes. He was trying to get banks
behind them to open a new company.

Knickerbockers’ was starting to make certificates to get gold then he would take the money out of his
bank. People began to speculate and then the bank started to fall apart. Charles Barney tried to appeal to J.P
Morgan. He helped banks out. Morgan wouldn't help him. The failure was inescapable. The money was gone
and spread panic. Then Morgan stepped in to prevent the failure and loss of his bank to stop the panic of 1908.
They argued all night long. The cost was high. Affected the lives of people and businesses. Barney killed
himself. The bank opened five months later and people got most of their money back. Banks turned to the
govt. what if Morgan wasn't there? Bankers wouldn't want to give up a fraction of Federal Reserve. They make
their money by giving us money. Assets are money they make how much money the bank has. Liabilities are
money that they owe to depositors’. Both are equal. Can’t give everyone cash on demand. If people live in
beliefs that money is ok. Then it is.

25 years later the depression caused failure of banks. The federal bank was a last resort for other banks.
Did it work? The 20s had little complaints and times were good. The banking system increased money in the
system. As money was entered it was loaned and money was made. Credit was created. Cars were bought, steel
was bought, workers were paid, and money was saved and so on. Investors went wild in the market. That is
until the black Thursday. ON Nov, 24, 1929 the stock market fell sending the country into the depression.
Money dried up, the workers were unemployed, and no loans were being made. The economy hurt the banks
and the banks hurt the economy. Fed was supposed to enter in a counter cisical policy. Instead it played a
neutral role and let chaos happen. The nation looked for new leadership to help lift the depression.

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The Basics Of Money
Almost everything we do involves money. Money is created by our government, which also is
responsible of regulating the value of it. Politicians talk more about money on taxes than anything else;
therefore, people must understand money in order to know how it should be managed. Modern world
could not exist without money because it is our most essential tool. A government’s lack of
understanding about the nature of money and how it functions has led nations near catastrophes. A
detailed study of money is complex; however, you don’t need a course of economics in order to know
the simple concepts of money and to see how it works.
The universal definition of money is what you use to buy things. We usually think of money
as coins, dollars, checks, and credit cards. Coins, according to Herodotus, were first made by the King
of Libya. Convenience money is the limited amount of money that permits us to make small
purchases. Credit cards and checks make it possible to make big purchases without all of the luggage.
For many years money only meant gold and silver. In the American colonies, things such as whiskey,
rice, cattle, and tobacco also served as money. Back then money was based on trading things to
purchase goods and services. Needless to say we don’t use those things any more because it’s not what
is convenient. Eventually Paper Money was invented. Paper money was the only thing that was able
to replace gold. Money is the universal beholder of purchasing power. It is the common ground
between people and other countries. Money determines a persons wealth. Money is available for all to
use however it varies from person to person. Money can not just sit around it must be used. If it were
to build up it would limit the amount of people that had it available for them to use. If a persons
spends more than they can gain they will soon be left high and dry. This problem often happens in
America.
Money and production must be kept in balance if prices are not to rise and fall. A constantly
increasing or decreasing supply of money without an increasing or decreasing quantity of goods and
services keeps the economy unbalanced. Money also acts as a temporary store house. People use
money as a method of saving for future use. Imagine yourself as bill gates all that money but what does
he need? Or with a small cash flow but you make ends meet and being able to survive. Having all the
necessities of life is therefore called wealth. But, really wealth is in the eye of the beholder. Wealth is
created through work; and without work there are no goods and services to be produced. Someone has
to produce a lunch in order for others to have one. Too much money or too little money interferes
with the efficient distribution of goods and services.

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 Inflation Misconception
There is a common misconception of inflation. When ever inflation occurs everyone loses.
That is simply not the case. During the 1970’s, inflation was on the rise. The government stepped in
and took action combating against economic inflation under the Johnson Administration. In the
previous administration, John F. Kennedy had called for a new era of America’s economy, but that was
cut short with his assassination before he finished his first term as President. Inflation can either make
or ruin an economy.
As soon as Lyndon B. Johnson took office he passed an immediate tax cut plan. This went
over well on both sides of the board as well as in the public’s eye. At this point unemployment was
low, but the economists were concerned about inflation because of the rapidly growing economy. One
thing that was helping the economy flourish was the plethora of raw materials coming out of
American soil.
All the changes that came about during the Johnson Administration were part of his dream of
a great society. He called for a clean up of poverty in America. He had believed he could create a
society where not a single person was on the streets and everyone had a job. The involvement of the
Vietnam war detoured his plans Johnson’s original intentions with the clean up was supposed to be
something that didn’t affect the every day lives of Americans. Congresses spending couldn’t be kept
quiet from Americans. They were bound to find out and the clean was no longer going to be quiet.
The news coverage and the draft did not help to keep it much of a secret either.
Inflation rose when we were in the middle of the Vietnam war. Demand was overpowering the
supply due to the production of needs for the war. Up until this time supply of products was more
than keeping up with demand. To help get the economy back in shape, Johnson imposed a year surtax
in 1968.
Inflation can either be misfortunate or beneficial. Inflation will hurt those families with fixed
incomes like the elderly, disabled or any one who rely’s on pension plans and social security benefits.
However, some homeowners will benefit from inflation. The interest rate on loans and other forms of
borrowing money will decrease, not only that but the value of there homes will rise because the value
of a dollar rises. Just because the value of the dollar rises some people think they are wealthier than
they were before.

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 Aggregate Supply and Aggregate Demand
Supply and demand is what sets the price of something. Water is something that we don’t worry about
because is available and cheap, but for what water does there is no substitute. In 1975 was one of the worst
droughts of California because the season of the rain didn’t come. This cause more than 1400 fires in three
weeks period. In 1977 start to promote conservation methods like they cut the ration per house to 46 gallon
per day and if you pass the limited they were penalized. By all this method they reduced the water that they
consume by the 66 percent. The people were willing to pay more prices for water, something that before they
didn’t worry about. The principle that the crisis of water in California show the principle that when something
is scarce the price increase. This principle is call law of diminishing marginal utility. When something is
abundant we pay a low price for that product but when is scarce we don’t mind to pay more for the same
product, but also when the price increase the people try to don’t use this much that products or to buy less of
this products and try to get more of other product that supplement this product that is expensive. An example
of this is when the price of the water was expensive they create ways to safe money and to don’t uses a lot of
water and you get very careful of how you use it. But later when the rain start again the price decrease and also
the people start to use it more and more and also the marginal utility start to decrease. Another example is
what happens after the war of 1971 when the price of oil increases four times. This oil crises cause in the
economy a hole. In 1971 government put price sealing to the price of oil. James Schesinger the first secretary
of energy said that they put the sealing to control the industry, but this control can make some small companies
go out of business. But after the government stops the control of the prices in the oil the local companies and
entrepreneurs start again to open their industries to extract oil. After they start making good money in that
industry more people and companies start to work in that field. This example of the oil shows how producers
and consumer react at higher prices. With higher prices the costumer find ways to use less and economize oil,
but also the higher price is an incentive to producers to produce more. Higher prices promise higher profits
which even if that has to spend more money to produce more they are going to do it. Another example is the
jean. When something is hot you have to own one and you are not worry of how much you have to pay to get
it. When at the beginning the price was very high because every body wants one. To keep the people buying
more of the jeans the producer also invest more money in advertising. Richard Gil said that the demand of the
product change constantly. Time change and also what we want change constantly that’s is why the
entrepreneur are all the time inventing something new or how to keep the product at the top by publicity. The
law of the supply and demand shows that when the quantity of the product increases the price of the good will
decrease. The law of supply and demand determines the price of all products.

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 Spend & Prosper
Johan Maynard Keynes was a revolutionary thinker whose idea would have in profound effect on the
government planned economical policies. He is one of the most important figures in the history of economics.
He was borne in 1883 in part of Cambridge. He was the oldest of three intellectual children. He was one of the
outstanding students in that time. He fallowed one of his teachers, Alfred Marshall. Alfred Marshall introduced
him about Adam Smith economical concepts and led him to economics field. When he was 19 years old he
moved to Cambridge and joined Kings College majoring Mathematics; however, letter on he changed to
economics because he believed mathematics include the academic discipline and economics give him a chance
to do good. While he was in College he met intellectual friends. They introduce him the secret of dissection.
They were fascinated by G.E. Moore. They free discuss and strongly criticize about several ideas and concepts
like religion, personal life, relation ship, each other and much more. He worked in India for two years. While he
was there, he learned all about Indian currency and that helps him to publish a book which letter helped him in
his career.
In 1914 the economy broke, and industry was put in war. At first the war was fought by volunteers’
patriots, but in 1915 the number of volunteers reduced; then a draft was demanded. Keynes objected the idea
of being sent to the war by force. He and others who oppose the system went to the country side. Some of his
friends start working on the farm. Keynes became the senior official in the treasure
In 1919 Keynes delegated, in France as a treasury advisory to the British, on the piece negotiation
between Germany and France. The French determined the Germany should be humiliated for the distraction
of that country. Keynes repeatedly pointed out the vast demand and compensation was more than Germens
could pay. He said that Germanys economic growing would once again destroy the stability of Europe by
insane delusions, and he also stated that Germen people had over turn the foundation which we all lived.
However, the spokes man of British and French people round the risk of completing the ruin. Keynes voice
was unheard and the treaty was signed. Economic recovery of Germany made impossible. Then, he resigned
from the treasury and wrote book. In his book he described President Wilson as a man of theological instead of
intellectual thinker.
After the war there was a small boom but then there was a slump that seemed to have no end. Solders
that were bitter from their war experienced then become more bitter when they knew there was no job for
them. The bank of England thought that there needed to be more saving rather than spending. Keynes
believed that was the worst mistake ever done. Britain wanted back to the gold standard to the pr-war rate, so
the wage fell especially in the mining industry and strikes began. Keynes was angry about the cut of wages and
fell sorry for the miners.
In 1925, Keynes married Lydia, a ballerina who won most of his time. It was a mirage of beauty and
brain. They took up farming until serious unemployment arose and He wanted to raise public support. He
believed government could control unemployment if they wanted to. His idea was accepted by some liberals.
After collapse of American stock market, 1929, Britain withdrew their gold. Tax and unemployment increase.
As a result England currency became devaluated. Keynes suggested government spending on public work could
reduce the rising unemployment, but he was ignored. Ken also believed if the unemployment was put to work
on borrowed money, the economy would improve.
He wrote a book which has a greet effect in today’s economy the title of the book is “The General
Theory of Employment, Interest and money”.

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 Profit & Interest
In the 1970's inflation drove the interest rates up. They were forced to pay higher interest rates on their
mortgages. Home builders suffered from the high interest rates in Maryland. It even forced them out of the
business. Lenders cut back on home mortgages. Usury laws placed a sealing on many of the states housing.
During the time of high interest rates many were stuck where they were, meaning they couldn’t sell the home
or even buy another. Once that law was lifted the rates gradually went down and were average with rates across
the country. A simple example of this is if the cost of sugar goes up then the price for sugar will also go up.
This same idea relates to money if the money is short then the interest of money will go up. Economist Richard
Gill explains that the higher the interest rates there will be not as many houses being built. When the interest
rate is low there will be many houses being built because you won’t have to pay as much for borrowing a loan.
On the supply side the higher the rate of interest the more supply that will be available. General Motors
Company has been building its finest products at its Detroit plant where it raged throughout the eras. During
wartime it was building vehicles for the government as well as the changing products over the years. Millions of
cars have rolled out of the doors here. Why after all those years would GM move to a different area? What
made them switch their ways was one in every four cars was foreign which made them change their approach
after being the dominating auto maker in America. When it came time to do so GM decided to move to a new
production plant. There were tradeoffs to doing this like is it worth all of the money that is going to be spent
on this project, do the pros out weigh the cons. Your rate of return must be high like it was in the past when
GM was leading the industry. The CEO came up with a budget for this new plan that would take 3 years and
cost around $80 million for this new assembly plant. At GM’s new plant they were able to produce more goods
per hour than the last plant. Also they used technology in helping them achieve the astounding rate of 75 cars
made per hour. By utilizing this new technology and building this new plant it brings in more revenue of course
because more products are being made. The plant is state of the art assembly plant of this age its cleaner,
brighter, and a better place to work even though it does require less workers due to technology. When deciding
to invest this money GM had to look at both projected rate of return and the interest rate determining if it
would be a good investment for the company. It has shown that this investment was profitable to GM because
they can make more cars than their other plant could and it is more efficient. The higher the interest rate the
lower the company will make in return. So if the interest rate on the plant was higher than it was there would
be no such plant. CEO of apple computers Stephen Jobs first started out programming video games for Atari.
Then when he made enough money he was able to start his dream of building computers. He started a
partnership which turned into a multi million dollar company. They had to sell their VW bus and
programmable calculator to get enough money for a prototype. Once they went to a computer show in
California, they knew they would be a $500 million company. When Apple computers went public there were
shares of stock now available. Making the owners multi millionaires.

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 Fiscal Policy
Private enterprise can give full employment to our people. In 1944, Franklin Roosevelt declares that every
American has a right to a job. Can the government guarantee that we’ll never have another Great Depression?
Good question; in1952, Dwight Eisenhower prepares to take office as the first republican President since
Herbert Hoover; how will he handle his first economic crisis? The torch has been passed to a new generation
of Americans. In 1961, John Kennedy had promised to get the country moving again. How will he keep his
promise? Three Presidents, three policies, but one common resolve; the government must never permit
another Great Depression. Is this possible? If you notice the Rollercoaster headlines, you’ll see: Ford Sells
Model T, Oil Industry booms, Stock Market Crashes, Depression Lingers, Farmer protest prices, FDR offers
new deal, Labor strikes, War Economy booms, LBJ hails great society, Fed loosens money supply, and Airlines
deregulate. The 20 years after WWII brought self-confidence to American political economics. Government
could promote prosperity by manipulating taxes and spending. These continuing adjustments are called The
Fiscal Policy. In 1944, Americans remembered 1/4 of the work force without jobs, factories closed, and
families hungry. 12 million Americans were uniformed; 66 million more had jobs supporting the mightiest war
machine ever known. Truman was asked: When is unemployment too high? He said it depends on whether or
not you are unemployed. This showed that he had a fundamental understanding of the game. He realized that
you had to talk about people and what was happening to them and where the hardships were. As a senator,
Harry Truman had worked hard to push a full employment bill. As a President, he signed the employment act
of 1946; a law that changed greatly during congressional debate. It no longer referred to full employment,
instructing government instead to promote maximum employment, production, and purchasing power. What
was lost from the original idea? What was lost was the right to a job, the right to work; the right to an
opportunity for paid employment at good wages. Throughout 1963, President Kennedy tried to sell the $12
billion tax cut to a reluctant congress. Then, in November, tragedy struck. We meet in grief. John Kennedy’s
death commands what his life conveyed, that America must move forward. Congress passed the Kennedy tax
program. President Lyndon Johnson signed it into law on March 15, 1964, a monument to a martyred
President. The economy took off in a burst of prosperity. Within 18 months, GNP was growing at a feverish
5%. Unemployment dropped to its lowest rate in 7 years. It seemed that, in President Kennedy’s phrase, A
Rising Tide really had life all boats. On December 31, 1965, the cover of Time Magazine featured John
Maynard Keynes, 19 years dead, but once again a household word. For economists accustomed to obscurity, it
was a welcome change to bask in the limelight. Just about everyone agreed that the tax cut was an unqualified
success. By 1965, it appeared we had finally learned how to use fiscal policy to control the economy. Indeed the
1964 tax cut had seemed like such a rousing success. It did seem to get the country moving again. It seemed as
proof of the Keynesian theory, and dominant among economists by the 1960s. In terms of diagram, the tax
cut gave consumers more disposable income. It shifted up this curve of private spending. The gap between
spending and full employment income was eradicated. It could have been done, as professor Galbraith urged,
by increasing public spending and increasing. The apparent success of the 1964 tax cut was hailed by many as a
vindication of Keynesian ideas. This was the heyday of Keynesian economics. But problems and theories
change. We thought that fiscal policy held the key to ever-increasing growth and prosperity. The fall was
coming with a look at fiscal policy’s limits.

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 Monetary Policy
“We could do more. We could wreck this country, but we won’t do it. In 1975, Fed Chairman Arthur
Burns refused to open the monetary floodgates to fight rising unemployment. Why was he holding
back?”“Four years later, Chairman Paul Volcker set the Fed on a course that would lead to the worst recession
since the Great Depresion. What was worth the price? On October 20, 1987, the heartbeat of the financial
world nearly fluttered out. What could new Fed Chairman Alan Greenspan do to revive the patient?”

“During the 1970s and 80s, the Federal Reserve adopted long-term policies to halt inflation and ease
unemployment, but what would the Fed do in an economic emergency? Monetary policy: How well does it
work?”“The Federal Reserve Board decides how much money the economy needs to grow. In the early 1970s,
the Fed tried using the money supply to keep the economy stable. During inflation, the Fed tightened the
money supply to squeeze excess dollars out of the economy.”

“During recession, it increased the money supply to stimulate growth. In 1975, the Fed faced a new
dilemma. Caught between inflation and recession, how did Chairman Burns keep the economy on course? By
late 1974, inflation had become a serious economic problem. Under pressure from rising fuel prices, inflation
rose to a staggering 12%.”
“Burns stuck to his guns and kept the money supply growing modestly. By summer, indicators showed the first
signs of recovery. By fall, the unemployment rate had dropped substantially. Most important for the Fed, the
recovery did not cause the inflation. By year’s end, it fell to 9%.”

“Arthur Burns took a difficult and controversial stand. Caught in the currents of political pressure, he
kept monetary policy on course. Using velocity as a guide, he succeeded in fostering a recovery without further
fueling inflation.” “How does this concept fit into the economic picture? Economists like terms like velocity
because they suggest we are scientists, like physicists. Perhaps we aren’t quite that scientific, but we have a
concept of velocity, the income velocity of money. Income velocity tells us how many times yearly a dollar
circulates to buy final goods and services.”

“We measure velocity by dividing money national income by the economy’s stock of money or money
supply. Annual money national income equals a good’s average price, P, times the quantity of goods produced,
Q. This is our old GNP concept in money terms.”
“Even the upturn in the market in late 1987 had had its parallel in the 1920s, only to be followed by a further
collapse and the greatest depression of all times. It didn’t happen. One reason was that theories of long-run
steadiness gave way to an appreciation of the crisis. Did we need more money, more liquidity?” “We would
have it, the Fed told us quickly and unequivocally. Forget general rules, handle the crisis first, which leaves us
where? Perhaps better off in economic fact that in economic theory. Cruise control is great in automobiles on
the open highway, but when the traffic gets hot and heavy, there is, alas, no substitute for human judgment,
hopefully, good judgment.”

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 The Federal Reserves Tasks:
What is the Fed? The Fed stands for the Federal Reserve System . One of the jobs of the Fed is to maintain a
smooth cash system. The Federal Reserve Bank receives cash from smaller banks. Once, the cash gets to the
Feds, robots move the cash to another area. Machines count the money. There is another machine that detects
counterfeit money; this money goes to the FBI for further investigation. Money that is really worn out is
shared to pieces and thrown in the trash. Back in 1992, a storm hits the south of Florida. There were
devastations that are almost ruined everything to pieces. Everybody needed food and other supplies, but stores
were closed. Stores from other stores came and sold to people, but they only took cash, no checks or credit
cards. Banks were running out of money, but the Feds supplied local banks with cash. Back then a Tuesday was
really hectic; 99 million dollars were delivered to local banks because people really needed. Hurricane Andrew
left a lot of people without homes. The Federal Reserve is the main bank, is like the mother to local banks.
That is one of the roles that the Federal Reserve System plays for local banks. Now, there are electronic
transfers. When there are big amounts that would take too long, then companies do it electronically. This is
done with a variety of computers and phone lines. In the 1800, own banks issue its own notes. If banks were in
trouble then the notes were useless. The Fed can lend to local banks. When local banks fail then people would
be in ruins. People usually panicked and demand their banks for their money back. During the Great
Depression of the 1930s banks usually went bankrupt . In May 1984, there was a banking national trouble,
Continental Illinois . This was the eighth biggest bank. Continental Illinois had lent oil companies big sums of
money. Businesses were worry withdrew their money. The Feds gave Continental Illinois is big sum of money.
This kind of lending has a discount rate, which it has to pay for the money lent. The Feds takes the
management out of Continental Illinois and takes over. Insuring of the banking financial system is another role
that the Federal Reserve banking system assists with. The Federal Reserve System examines banks. This way
the Federal Reserve System checks the books and sees how the bank is doing. This type of check is told in
advance to see if the banks in good health. That is how people are safe when they deposit the money into local
banks.

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 International Trade

“Many years ago “made in Japan” was synonym with low prices and lower quality while French imports were
only for the wealthy.” International Trade refers to trade between nations. The trade between nations is mainly
trade between businesses in different nations. International trade is carried across national borders. The trade is
of the goods and services. It represents a significant share of Gross Domestic Product.

Increasing international trade is the usually primary meaning of "globalization". There is an

International Trade Centre that can be accessed online. “Now many shoppers came in Japanese cars with
French tires. While most products here are still made in America, they compete with products made in the Far
East, Central and South America, and Europe. The United States is the world’s biggest economy.”

“What good does it do us to trade with other countries?” When we trade with other countries we
increase our GDP. The imports and the exports are major beneficiary and are impacting products of the
American economy. International trade is also a branch of economics, which, together with international
finance, forms the larger branch of international economics.

Traditionally trade was regulated through bilateral treaties between two nations. For centuries under
the belief in Mercantilism most nations had high tariffs and many restrictions on international trade. In the
19th century, especially in Britain, a belief in free trade became paramount and this view has dominated
thinking among western nations for most of the time since then. In the years since the Second World War
multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated
trade structure.

“Why trade with China? Why trade with any country? We trade simply because all countries stand to
benefit by trade.” “The principle behind this is the Great Law of Comparative Advantage. Suppose China could
produce oil rigs but that it would have to decrease textile production to do so. To produce 1 oil rig, it would
have to transfer labor and capital from textile production and lose, say, 2000 textile units.”

Free trade is usually most strongly supported by the most economically powerful nation in the world.
The Netherlands and the United Kingdom were both strong advocates of free trade when they were on top,
today the United States, the United Kingdom and Japan are its greatest proponents. However, many other
countries - including several rapidly developing nations such as India, China and Russia - are also becoming
advocates of free trade. “Economic principle tells us that freer trade will mean lower consumer prices and, in
the long term, job security and a stable, competitive economy.”

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 America
The biggest economy with music, movies, entertainment and sports. Even our food has hit the
whole world and America is famous for all the fast foods. But we still have poverty in America. Even some
Americans don’t like America because health, crime, drugs, sex, poverty, and more. But there are so many
countries that live in poverty and have nothing to eat or drink. Is it our government or is it our people that in
live America. Hong Kong is richer than America and slight poverty. But the government does not butt into
peoples business. For which the American government are into everyone’s business in the whole country.
India is the worse place to live, but they are rich but don’t give it to the people. Some people even say that
Hong Kong is even better than America especially the ones who want to open business. In Hong Kong it is
easier to open a business than America. To open a business in America you have to fill out several forms and
go to fill for licenses and more. In Hong Kong you fill our one paper and you are approved. In India it is even
worse than any other country in the world. You have to fill out papers after papers after papers. Then you
have to wait and wait behind thousands of other people who are waiting. But if you look Hong Kong has less
poverty than America, and why is there because people are willing to work because they don’t have so many
restriction and anybody but anybody can own a business in Hong Kong. Europe also has more poverty than
Hong Kong and America. A clothing maker had to close his factory because he couldn’t get electricity. Four
hundred workers had to loose their jobs. Many famous foods and drinks have struggled to get into India.
India has the worse restrictions than the whole world. There are more Indians in America than there are
Americans. We so have more resources than any other country. But like America and Hong Kong they were
not planned and it just happened. In India everything is planned out for everybody and that is why India is so
bad.
America has made a difference in the way we live and we open to immigrants from everywhere. Most
companies in America are owned by an immigrant, it is a land of opportunity for everyone because America is
open to ideas of everyone. A lot of immigrants still miss their countries but still will not go back because
America has given such a better opportunity to everyone. France, Sweden, and Canada have thousands of
people leave their country to come to America. America gives a sense of freedom and gave a gift to come to
America. And America is the only country where you can come as a peasant and become royalty. You can be
anyone you want to be in America. America is open to new ideas everywhere from the world. Our technology
has made America number one and even the inventions. The theater is famous in America everyone wants to
go to see entertainment. Sex has become a big thing in America and has come out of the dark corner into the
light. But, still people don’t want to see that. China was once the leader of the world and now they are in
poverty because they sealed themselves from the world to protect themselves but in the long run it hurt them.
In America we are open to many things and to other people.
We have so much pollution, racism, sex, and crime. We have the highest murder rate and the higher amount of
people in prisons. We have so much pollution in America but we are still cleaner than most countries in the
world. We do have racism but never turns our so bad like other countries who kill other people because they
are not their race. In America we fight but never go over board with routes and burning down buildings and
killing people. Now in America we are all learning to get along with each other since the 60s. Racism in
America is so rare now that you don’t see it. But there are problems with the rich and the poor. They say that
the rich get rich and the poor get left behind. But most people who live in poverty in America, about 90% of
them have color televisions, microwaves, and cars, which other countries dream of. So most people who live in
poverty in America have luxuries compared to other country. The government helps the poor so they don’t
have to live in poverty. But now the working people are being left behind. There are layoffs and fewer jobs
were getting produced. Now there are more jobs than ever that everyone can have a job and keep up with
society. Now the jobs are even better than they ever use to be. Our unemployment is the lowest of all other
countries. Europe gets better benefits but the protect jobs and new workers can’t work because there are not
enough jobs. Medical care has become insecure in America for a long time. But everyone gets the same tech
than other people no matter how poor or rich you are. Big thing people look for is if they want to go to that

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country and most people want to come to America. A lot of people try so many ways to get into America and
keep trying all the time. So is America really number one or not. We need democracy and rules or the country
will go under. But people need a chance and no one should plan everything just let everything happen.
America and Hong Kong were never planned they just happened and worked out the best. Liberty and
freedom is why America is number one and the land of opportunity that is why America is great.

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 Cash$
America has become a nation of investors. Over 70 years the market plunged and changed the market forever.
1920 was the nation of peace, with tennis, new heroes, babe Ruth, and jazz age. The age with slippers drinking
cocktails, they had a new technology with the radio. It was a big turn in the 20s and the market was roaring.
Than on October 24, 1929 called the Black Thursday the world became crashing down called the biggest crash.
This happened in the great depression. Nation of farms and small towns, and soldiers coming back home from
world war one and finding the place the same as they left it. Americans lacked bath and unemployment was on
the run. Telephones, electricity, and radios were luxuries. Republican Warren G. Harden was the 29th
president who said, “Less government in business, and more business in government. Was time was lifted and
the economy was booming with the movies booming. The French person said that day by day in everyway I
am getting better and the people were getting better. The nation was growing quickly and the market was
growing with it. Al Gordon was one man who worked on Wall Street in the 20s. Many people could do things
those days, the land was building. The stock exchange was getting more and more people in the market and
people were making money. Major Jimmy Walker loved New York and fought for all the things in New York.
He became very famous in public and made it in the market. After Hardens death in 1923 everything went
quiet. Europe did not think that this was a great age because they just got out of the war. But America was
great at this time. This is the period where Hitler came in, and Britain had government. Red scare began in
America with immigrant came with suspicion. As a decade open the Wall Street was tight and the security was
high that most brokers had body guard. The market became a big competition. A bomb exploded by J.P.
Morgan bank killing 30 people and the bombers were never found. Bankers were then in loaning tons of
money to people for the stock market stopping the panic in the market. The bank was helping people during
this time; J.P. Morgan was the big fish at this time during roaring 20s. The market became an inside came
where you had to know people to get through the market and come out successful. This is when the market
was unregulated by the government. Americans were still learning about the market about the difference
between stocks and bonds. Then liberty bonds came out to finance the war and became very popular and
everyone was buying them. People were buying security instead of putting their money away. The bull market
was booming with the liberty stocks. New York stock exchange traded security; traders were on the street to
brokers out the windows to make trades. Common stocks were dangerous but people were still buying them.
The National City Company came into New York with the common stocks. Late 1924 the stock market
starting taking off again. Calvin College said that business is business and the businesses and jobs were
booming. US steel became the owners of America because everyone needed the company with all living things
people use like trains and cars. The railroads had then dominated the Americans. Henry Ford then came into
place and 20 million automobiles and built a factory where every ten seconds a car was built with the assembly
line. Ford success had countless competitors but then was soon forgotten. Suburbs came to live with the
automobiles and almost everyone had a ford automobile. At this time it became a boom for the middle class
people to have luxuries like the rich. The movies were becoming blossoming into the country with sound.
There was an Italian finance man who was brilliant who made the Bank of Italy which later became the Bank of
America. He helped middle class people who wanted to own stores and helped immigrants. This bank had the
most consumers then any other bank because he helps the middle people not just the rich. Finally color came
to the movies than sound right after. People could see speaking moving picture. The standard of living started
to spring up with water running, electricity and things for woman to make lives easier. President College was
the first president to let people hear him live. People got to heat music, baseball games, and news. Radio
became important to sell things and advertising for companies. Down payment was added into the Webster
dictionary. Credit became popular and was easy to get. The economy had it good when it came to money and
the stocks. Money was made everywhere and work field was booming. Ponzy was a financer and promised
miracles but it was just scam promising people more money. He took money and took over 40 thousands
people’s money and took off to South America. People were buying property thinking the property can only
go up but yet it when down instead. A hurricane hit Florida which destroyed many homes. Liquor was soon
illegal and people were smuggling it in the country. But alcohol was big business and became very popular

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again and brought people in. Queen of the night operated night clubs around the state where drinks were a
dollar twenty times more than a bus fair. Because alcohol was illegal the booze was rocket high and costing
people money but making money for the mobs. Baba Ruth was sold to the New York Yankees and boxing
became popular and got paid a lot. But the stock market was the best place to be to make money. Now
woman were making stocks and started working. Life was easy at this time when you were in the market.
Then pools came into the market where people came into a group and pushed up the market and this was not
illegal. Pooling became very famous that everyone wanted to do it. Investors were become more famous that
anybody but anybody could do it. Fisher explained the process Americans were getting at this time and how
Americans were rising. Books about businesses were coming in and made the market more popular. Stocks
and bonds were getting high and higher and more debt was rising. Banks were borrowing a lot of money to
people and more debt was produced. Mutual funds than came in for money management and now the market
was falling. There were too many outstanding shares and many people in debt. The stocks that were selling
had now value but the radio was the business to go in and the stock to invest in. Radio was rising and more
radios were getting produced. Meehan was in a pool helping the radio stock market rise. It raised once and
was never like that again. Radio was rising and then sinking everyday and was a risky investment. Strange
started to go on the people and started with the great depression. Banks didn’t want to loan money but so
many people going into more and more debt. The crash was happening soon and finally came into Wall Street.

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