Trade of goods and services between countries

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1. Trade of goods and services between countries - exports and imports - plunged during the Great Depression. How did this collapse in international trade generally affect domestic economies of individual nations? Use the circular flow model to explain your answer.

2. Is the PPF model applicable to the events of Great Depression (i.e. can this model be used to help describe or explain the Great Depression)? Use the model to see if you can describe the effects and/or potential causes of the Depression.

3. Prices of goods and wages for workers fell sharply in most countries during the 1930s. Why didn't this economy-wide ‘deflation' (i.e. a general fall in the overall price level) result in a re-equilibrating of the macro-economy and a restoration of full employment?

4. Below is a graph, produced by the International Bank for International Settlements (BIS). Interpret what the graph is saying in words and see if you can put together a preliminary economic story about what it is saying about (a) the relationship between the ‘real' and ‘financial' sectors during the Great Depression and (b) the US and the rest of the developed world in general.

1628_International Bank for International Settlements.jpg

Reference no: EM131157859

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