BA Financial Crisis

When was the Great Depression?

1929

What did it lead to?

Global crisis

Main crisis causes?

Cheap money

What was the Roaring Twenties?

1920s prosperity and social change;

What is a bubble?

Prices rise fast without real value;

What happened after the 1929 crash?

Bank failures and economic collapse;

U.S. GDP drop during Depression?

Over 25%;

Peak unemployment rate?

25%;

What ended the Depression?

WWII demand;

Who was John Maynard Keynes?

British economist

What did Keynes believe?

Government should boost demand in recessions;

What did classical economists believe?

Markets fix themselves;

Cause of 2008 Great Recession?

Housing bubble and subprime loans;

What are subprime mortgages?

Risky loans to weak borrowers;

What happened when rates rose?

Prices fell

Which bank collapsed?

Lehman Brothers;

Fed’s response to 2008 crisis?

Cut rates to near zero;

Result of low rates?

Fast market recovery;

Why did Fed raise rates in 2015–2019?

To slow inflation;

What happened in 2020?

COVID → rates cut to 0;

2023–2025 rate trend?

Rose to 5.5%

What causes inflation (Friedman)?

Too much money supply;

What does monetarism support?

Money supply is the main driver for inflation, and the gov should NOT be involved

Are markets self-correcting?

Yes