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Government Policy on the economy

Government Policy on the economy . Standard 6.3 E.Q. How did the Government provoke problems in the economy? . Government responds to economy .

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Government Policy on the economy

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  1. Government Policy on the economy Standard 6.3 E.Q. How did the Government provoke problems in the economy?

  2. Government responds to economy • Republican federal government abandoned its previous policy of progressivism and limited the government regulation of Big Business that started under Teddy Roosevelt’s administration.

  3. Return to laissez – Faire Policy • Resulted in corporations becoming increasing powerful. • Hawley – Smoot Tariff Act: Established the highest protective tariff in US history. Increased production and purchase of American goods. • Removed the policy of the Progressive Era. • Worsened the Depression. • Supreme Court overturned limitations on child labor and minimum wage laws for women. • Income taxes for wealthy were slashed.

  4. Government Responds • In an effort to protect American industries from foreign competition, Congress passed a very high tariff in 1930. • Taxes on imports further damaged the economy by depressing international trade. • Foreigners were unable to sell their goods in US markets, and so did not have dollars with which to buy American products.

  5. Government Responds • Foreign nations imposed trade barriers of their own, stifling international trade and further exacerbating the depression condition of the world’s economy. • In previous depressions the reaction of the government had been merely to wait it out and let the marketplace find a new equilibrium.

  6. Wealthy Spending • Wealthy spent high proportion of their incomes on luxury goods and could not make up for the loss of spending power of the great majority of the people. • Tax saving money was invested in the stock market rather than in new factories, since there was limited demand on goods. • Investments in the stock market drove up speculation in business could not sustain profitability in the face of lagging consumer demand.

  7. Stock Market Reacts • Business cut back production; resulted in excessive inventories. • Companies then also invested their money in stock market speculation rather than in production. • Investors nothing the large inventories. Began to reconsidered their investments. • Didn’t Protect Banks

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