Effect of the Great Depression
After the Great Depression, people began to hoard their money. Whatever they could get from the bank they saved in their houses. This led to less money circulating in the economy. Prices began to drop as their was less money circulating. The United States government started protectionist policies that ended up killing international trade and worsened the world economy.
The Great Depression also got John Maynard Keynes thinking. He noticed a trend of recessions after times of prosperity. This brought about the ideas of Keynesian Economics. This was a main factor in recovering after the Great Depression.
In Canada, there was the same issues as ...view middle of the document...
To also increase the economy he increased government spending to support large projects that would provide multiple jobs throughout the United States. This is in addition to declaring hoarding money illegal, increasing the amount of cash flowing in the economy.
Ways in Which Canada is a Welfare State
Canada is a welfare state because we have public healthcare, public education, and we have a large social safety net. Our social safety net consists of an income support or can be another term depending on the province, Old Age Security, Registered Retirement Savings Plan, Canada Pension Plan, and Employment Insurance. Canada also subsidizes many industries, such as secondary education, and all energy producers. Canada also heavily regulates industries to ensure they are following environmental guidelines, and health and safety acts.
Ways in Which Canada is a Market Economy
Canada is a Market economy because every corporation besides healthcare is subject to supply and demand. Although some industries are subsidized they are not owned by the government and their prices are not centrally planned. All of Canada’s industries rely on consumers buying their goods and services.
Market Based Economy
A market based economy is an economy that relies on supply and demand. In a pure market economy, the government does not interfere with the market at all. The market will rely on competition to drive for better products and efficiency. This type of economy relies on governments having policies that represent laissez-faire economics. This is the economy that Adam Smith envisioned when he developed the ideas behind supply and demand.
The business cycle is a major component of a market based economy as it is the driving force. The business cycle describes the booms and busts which follow the curve in the diagram to the bottom right. In a market based economy, money goes in a circle flowing from household to businesses. Households spend money on consumer goods, and works to get wages from businesses. The diagram on the bottom left shows the flow of money in a market based economy.
Keynes’ ideas were that government should intervene in the market to help diminish the effects of the booms and busts of an unregulated market. When an economy is booming, central banks will raise interest rates, raise taxes, and reduce government spending. When an economy is approaching a recession, government will reduce interest rates, reduce taxes, and increase government spending.The graph to the right, shows the boom and bust cycle in the thin blue lines, the thin orange line shows the taxes collected, the green line shows government spending, and the thick blue line shows the desired result. If Keynes’ model works, the economy will follow the trend of the thick blue line instead of the thin blue line.
Beliefs of Supporters
Many supporters of Keynesian economics believe in government...