Logo
Logo
Log inSign up
Logo

Tools

AI Concept MapsAI Mind MapsAI Study NotesAI FlashcardsAI Quizzes

Resources

BlogTemplate

Info

PricingFAQTeam

info@algoreducation.com

Corso Castelfidardo 30A, Torino (TO), Italy

Algor Lab S.r.l. - Startup Innovativa - P.IVA IT12537010014

Privacy PolicyCookie PolicyTerms and Conditions

The Roosevelt Recession: A Lesson in Economic Policy

The Roosevelt Recession of 1937-38 was a significant economic downturn during the recovery from the Great Depression, caused by monetary and fiscal policies. Key factors included the Federal Reserve's increased reserve requirements, the Treasury's gold sterilization policy, and a shift towards fiscal austerity with the introduction of the Social Security tax. These policies, along with external pressures, led to a sharp decline in GDP and a rise in unemployment, teaching valuable lessons for economic policy.

See more
Open map in editor

1

4

Open map in editor

Want to create maps from your material?

Insert your material in few seconds you will have your Algor Card with maps, summaries, flashcards and quizzes.

Try Algor

Learn with Algor Education flashcards

Click on each Card to learn more about the topic

1

The economic downturn from 1937 to 1938, known as the ______ Recession, disrupted the United States' rebound from the Great Depression.

Click to check the answer

Roosevelt

2

Key policies of the New Deal

Click to check the answer

New Deal included public work programs, financial reforms, and regulations to stimulate economic recovery.

3

Roosevelt's economic projections in early 1937

Click to check the answer

President Roosevelt was optimistic, expecting continued growth and recovery.

4

Economic indicators before the Roosevelt Recession

Click to check the answer

GNP was rising, unemployment was falling, indicating a strong recovery before the downturn.

5

To counter potential inflation, the policy caused banks to hoard excess reserves and cut back on ______, which echoed the monetary issues of the ______ Depression.

Click to check the answer

lending Great

6

Gold sterilization impact on money supply

Click to check the answer

Gold sterilization led to reduced money circulation, intensifying deflationary pressure.

7

Coordination between Federal Reserve and Treasury Department

Click to check the answer

Lack of policy alignment caused simultaneous contractionary actions, undermining economic recovery.

8

In 1937, the implementation of the ______ tax led to a decrease in consumer spending power, aggravating the economic downturn.

Click to check the answer

Social Security

9

Impact of Spanish Civil War on U.S. business costs

Click to check the answer

Spanish Civil War escalated European tensions, leading to higher material costs, reducing U.S. business profits.

10

Effects of stronger labor movements on U.S. wages

Click to check the answer

Rise of organized labor movements in the U.S. drove wages up, increasing operational costs for businesses.

11

The ______ Recession led to a significant setback in the U.S. economy with a 10% drop in real GDP, nearly 20% unemployment, and a steep decline in industrial output.

Click to check the answer

Roosevelt

12

Roosevelt Recession recovery measures

Click to check the answer

Reversal of tight monetary policies; resumption of deficit spending.

13

Impact of expansionary policies pre-WWII

Click to check the answer

Triggered economic growth; set stage for economy's significant expansion.

14

Modern economic policy debates are influenced by the lessons learned from the ______ ______, highlighting the importance of vigilance and adaptability.

Click to check the answer

Roosevelt Recession

Q&A

Here's a list of frequently asked questions on this topic

Similar Contents

Economics

Stop-Go Economics

View document

Economics

The European Free Trade Association (EFTA)

View document

Economics

Currency Devaluation and Its Effects on the UK Economy

View document

Economics

Economic History of the United Kingdom

View document

Exploring the Causes of the Roosevelt Recession

The Roosevelt Recession, a downturn in the United States economy from 1937 to 1938, interrupted the recovery from the Great Depression. This recession, named after President Franklin D. Roosevelt, was the third most severe economic contraction of the 20th century in the U.S. It was largely a consequence of the federal government's monetary and fiscal policies, which, although well-intentioned to sustain the recovery and control inflation, inadvertently suppressed economic growth.
Queue of people in vintage clothing outside a classical building, reflecting early 20th-century life with a somber mood under a cloudy sky.

The Economic Climate Before the Recession

The period leading up to the Roosevelt Recession was characterized by a strong recovery from the Great Depression, with significant gains in Gross National Product (GNP) and a marked decrease in unemployment rates. The New Deal, a series of programs and policies implemented by President Roosevelt, was instrumental in this economic revival. Despite the positive trends and the President's optimistic projections in early 1937, the economy was on the brink of another downturn, largely unforeseen by policymakers.

The Impact of Monetary Policy on the Recession

The Federal Reserve's decision to increase reserve requirements for banks was a pivotal moment that contributed to the Roosevelt Recession. This policy, aimed at curbing potential inflation, inadvertently led to a reduction in the money supply as banks accumulated excess reserves and reduced lending. The resulting monetary contraction mirrored the conditions that had worsened the Great Depression, leading to a decline in economic activity.

Fiscal Missteps and the Treasury's Influence

The Treasury Department's policy of gold sterilization, which involved sequestering gold to control inflation, also played a role in contracting the money supply. The lack of coordination between the Federal Reserve and the Treasury Department resulted in simultaneous contractionary measures that dampened the economic recovery, highlighting the need for careful policy alignment.

Fiscal Policy Changes and Their Deflationary Effects

The shift towards fiscal austerity, characterized by a reduction in deficit spending, further exacerbated the recession. This change represented a departure from the New Deal's Keynesian economic approach. The introduction of the Social Security tax in 1937, which reduced consumers' disposable income, contributed to a deflationary environment that suppressed economic spending and activity.

External Influences and Domestic Cost Pressures

International events, such as the Spanish Civil War and the rearmament of European nations, led to increased material costs, affecting the profitability of U.S. businesses. At home, the strengthening of labor and the rise of organized labor movements resulted in higher wages. These factors, combined with the monetary and fiscal policies of the time, created an economic environment that discouraged investment and production.

The Economic Toll of the Roosevelt Recession

The Roosevelt Recession reversed many of the economic improvements achieved during the recovery from the Great Depression. The U.S. economy experienced a 10% decline in real GDP, unemployment rates approached 20%, and industrial production fell sharply. This period highlighted the critical nature of policy decisions in economic recovery and the consequences of hasty reversals.

Policy Reversals and Economic Recovery

The government's response to the Roosevelt Recession included a reversal of the restrictive monetary policies and a resumption of deficit spending. These measures helped to reignite economic growth, setting the stage for a significant expansion of the economy in the years leading up to World War II. The return to expansionary policies was essential in pulling the economy out of the recession.

Lessons Learned from the Roosevelt Recession

The Roosevelt Recession provides a historical example of the dangers of prematurely withdrawing economic support measures. It underscores the importance of measured and well-coordinated economic interventions to foster growth and control inflation. The lessons from this recession continue to shape modern economic policy discussions, emphasizing the need for ongoing vigilance and flexibility in economic policymaking.