sammary

macroeconomy

2009 Chapter 6

This chapter highlights the explanation on classical macroeconomics that practiced within the early 1990s before the Great Depression takes place . It is an important incidence in the macro economy as it gives birth to the many economic analyses that further generate the fiscal policy in to recover the economy and promote the full employment at that time

The discussion focuses on the domestic money supply . Unlike the current practice where the money supply is the result of response to interest rate changes , at the early 1990s

the money supply refers to the possession of Gold by the Treasury , which called the gold standard Another characteristics of macro economy in the era is the infancy stage of non-banking sector , which current becomes one factor that contributes V its responsiveness to interest rates together with big government and large corporations

Therefore , the situation is an example of money supply that affects the economy significantly through various factors . The most popular example of the importance of money-regulating activities is the great depression of 1930 . Monetarists believed that the Great Depression was caused by Federal Reserve 's failure to maintain money supply at a good balance

One of the greatest contributors of the great depression was loan failures in American banks . In 1935 and 1936 , when the economy was beginning to recover , the FED made a decision that was intended to prevent more bank failures . The decision was to increase the bank reserve requirement by one-half . As a result...