1. A BRIEF HISTORY OF THE US to the 1930s Some preliminary definitions Real GDP is a measure of the Quantity of goods and services produced in an economy in a year. Nominal GDP is a measure of Spending in dollar terms The Price Level is a measure of the average prices of goods. The Inflation Rate measures how much (by what percent) the Price Level changes in a year. Real Growth measures how much (by what percent) Real GDP changes in a year. Nominal Growth measures how much (by what percent) Nominal GDP changes in a year. GDP = (Nominal) Gross Domestic Product = the dollar value of an economy’s production in a year.

2. Level Statistic… measuresThe rate of change (% Δ) per year is called … Real GDP (Q) Q = “Quantity” The quantity of goods & services produced in a year real GDP growth (q) Nominal GDP (X) X = “Expenditures” The number of dollars of spending on goods & services in a year nominal GDP growth (x) The Price Level (P)The average price of goods & services. “The Cost of Living” inflation rate (p)

3. Vocabulary notes: If …changed …the rate of change (% Δ) was … Real GDP (Q)rose (was higher than last year)q > 0 Real growth was positive fell (was lower than last year)q < 0 Real growth was negative* Nominal GDP (X)rose (was higher than last year)x > 0 fell (was lower than last year)x < 0 The Price Level (P)rose (was higher than last year)p > 0 fell (was lower than last year)p < 0 ** * negative real growth (q < 0) defines a recession ** negative inflation (p < 0) is called deflation For all these numbers… If the capital letter increased, its rate of change was positive If the capital letter decreased, its rate of change was negative

4. A BRIEF HISTORY OF THE US to the 1930s Real GDP mostly grew, averaging about 4%, punctuated by recessions. The Price Level rose (i.e. there was inflation) always and only during wars. After those wars the Price Level would fall (i.e. “deflation” would occur.) The Price Level in 1934 was about the same as it had been in 1776. Put another way: Real Growth was mostly positive – except during recessions when real growth was negative The “Curse of the odd Decades?” http://liberalarts.oregonstate.edu/files/polisci/faculty- research/sahr/inflation-conversion/pdf/sumprice_1774-2012.pdf Recessions were often associated with “bank panics” – failures of the banking system.

5. Real GDP has risen at about 3%, with recessions occurring less often than previously. The “Great Recession” (starting in 2008) is the only recession since the 1930s Depression that could perhaps be described as a “bank failure recession.” Inflation (rising prices) has become a persistent fact of the economy. Prices have risen at about 3% per year, sometimes considerably more and deflation has become exceedingly rare. A BRIEF HISTORY OF THE US since the 1930s Depression- era Deposit Insurance (FDIC?)