1. The Great Depression

2. Economics 101 What is the “economy”? What causes the economy to grow?
What causes the economy to slow down or go into recession?

3. Introduction to Economics
Economy:
The way in which we produce and distribute goods and services for our society.
Types of Economy
Human beings have invented many different ways to do this:
Hunter-Gatherers – hunter, gathered and shared everything (real communism)
Agrarian Feudalism – 90% of the people work and toil to keep the fortunate 10% of the population comfortable and well fed
Industrial Capitalism – those with capital ($) established businesses where they can exploit the labour of those without $, thereby creating profit
Communism – A system whereby the state exploits the labour of everyone (really, a system where you pretend to work and the state pretends to pay you!)

4. What makes the economy work?
Demand:
Our wants – things we need and desire
Human beings are a “wanting” animal – every society needs things in order to survive – we organize ourselves to produce these wants

5. How are Supply and Demand Related?
The availability of a good or service
Supply and demand are inversely related
As demand increases, supply will decrease
As supply decreases, prices for that thing will rise
This applies to virtually anything that can be bought and/or traded (food, housing, technology, but also currency)

7. So, what causes an economy to grow?
Production increases
More Profit
More jobs – higher employment
People have more money
Demand increases

8. Why is inflation bad for the economy?
Demand Inflation (higher prices)
Borrowing on Credit
Over-production / supply

9. What causes an economy to shrink – go into recession?
Smaller Profit
Lay-offs & high un-employment
People have less $
Lower Demand
Less Production

10. When demand increases, businesses begin to produce more
To produce more, they must hire more people (labour) and buy more raw material (commodities)
More people working also means more demand as people spend, and on and on it goes…
As a result, prices for all these things will rise – this is called inflation
If inflation goes too high, people can no longer afford things – they stop buying
This creates less demand, and leads to oversupply
Prices begin to drop, businesses slow down production, workers lose their jobs – even less demand, and so on…
This is called a recession - this is very bad!