Myth

          The Great Depression was not the first depression America had seen. There was several more before it but the Great Depression did last the longest. There is a relation between money supply and the economy. When the government expands the money supply and the credit supply, interest rates fall. The money that is floating around is “easy money.” This money is spent on capital goods and helps businesses. Soon the interest rates rise and profits are lowered. The effects of the “easy money” wear off and inflation occurs. By 1928 the Federal Reserve System had raised interest rates by 4 times. The money supply lowered because of this which leads to the Great depression and they FED continued to raise interest rates. The Great Depression happened with many events spiraling to the economies fall, it wasn’t one huge occurrence.  A free market will run through the business cycle constantly and will suffer but it will fix itself. The economy was not fixed all by government intervention. Yes, the government helped a bit, but the economy began to repair itself with time. President Hoover implemented a laissez-faire economy, which means “hands-off”, or that the government shouldn’t help the economy when it is suffering from a depression.  When the Smoot-Hawley act passed which taxed all imported goods many problems arose. Unemployment skyrocketed and the tax on the goods nearly tripled. When Franklin D. Roosevelt became president in 1932 and he implemented The New Deal. The main focus of this was relief, recovery, and reform. While trying to set his plan in action he rose the government spending from 3$ million to 10$ million, putting the government in more debt than before. Most of The New Deal was recognized to be unconstitutional and was soon gotten rid of. With this, the economy began to slowly rebuild and recover itself. 

My City

In creating a city that the economy would prosper would include a free market economy, entrepreneurs, and technology change, resulting in economic freedom.

In the free market economy the prices are determined by the supply and demand. In this type of economy the “invisible hand guides each self-interested market participant to act in the interests of others.” This type of market is similar to the selling pizza exercise in class. If there is more supply of pizza the average person wouldn’t pay a large amount of money for it, but if there is a demand for pizza people will pay a larger prize for it. If one wants to be successful they must become business people. The businesses people start will employ workers which will give people jobs and get money circulated through the economy.

In order to start an economy entrepreneurs are vital. Entrepreneurs are people who own or manage a business that was a risk. These certain people have an idea that they act upon and if successful will begin to grow their business. This will employ other people and give people things to buy which will flow money into the economy. I feel that entrepreneurs have to be greedy to make them successful. In the video we viewed in class it explained that greed isn’t a bad thing all the time. The more money these people put into the economy and eventually make for themselves creates more money and supply for the average person.

Another important thing in a city is using technology effectively. “Technological change not only gives us more options as consumers, it makes us more productive as workers.”  Using technology correctly and effectively allows the manufacturer to produce more products which creates more supply. More people will buy something if there is more of it at a lower cost. Technology allows producers to sell more which makes more money which in turn produces more money into the economy.

With a free market economy, entrepreneurs and technology an economy of economic freedom is created.  With Economic freedom a system of rules is created where “property rights are protected and the rule of law prevails. Countries with economic freedom have low tax rates, low amounts of regulation, and very little corruption.” With these essential aspects an economy is created that can grow and prosper.

(Quotes are taken from “The Success of an Idea: American Economic Development, 1787-2010.” By Ryan Johnson)