Download US. Economics History Review

American Economic History (with the AS-AD framework)
1. Industrial Revolution (1869 – 1897)
1869
1897
P
Y*
100.00
299.00
Y*
LAS0
LAS1
P*
100.00
63.40
P*
SAS0
SAS1
SAS2
P1869
(100.00)
P1897
(63.40)
AD
Y
Yf1869
(100.00)
Yf1897
(299.00)
-
mainly due to LAS (SAS), which was in turn due to K, L, T during
the American Industrial Revolution
AD was stable due to no (slow) increase in (gold) money supply
2. The Great Depression (1929 – 1939)
Y*
100.00
70.00
105.00
1929
1933
1939
P
P*
100.00
75.00
100.00
LAS
SAS
AD1939
AD1933
Y*
<<
AD1929
Y
Yf
- puzzling question: Why SAS did not shift to the right when P level fell
between 1929 and 1933? If it had done so, YSR* would not have decreased:
P
LAS
SAS0
SAS1
AD1933
Yf = YSR* = YLR
AD1929
Y
(This above situation did not happen in 1929-1939)
3. Pax Americana (1945 – 1962)
- a resumed economic growth, shifting LAS and SAS (and is coupled with an
increase in AD)
P
LAS0
LAS1
SAS0
SAS1
E’
e
AD1
AD0
Y1* << Yf
Yf’
Y
4. Evolution of Inflationary Spiral (1968 – 1969 – 1980’s)
Where people to do not have inflationary expectations, the economy
moves from (a) to (b) in the SR, and from (b) to (c) in the LR
When people have inflation expectations: one movement is from (c) to
:
(d)
When inflation expectations are excessive and are put into practice by
: strong union power, one movement is from (a) to (e) 
STAGFLATION
-:
P
SAS3
LAS0


e
SAS2

SAS1
d

SAS0
c
AD3
b
a



AD2
AD1
AD0
Y*
<<
Yf
Y
5. Oil Shocks (1972 – 1975)
Oil shocks – permanent (negative) AS shocks, shift LAS and SAS to
the left
: Additional adjustment of AS curve
:

P
LAS1
LAS0
SAS2

SAS1

AD
Y
SAS0