Government's Role in US Economy History

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Questions and Answers

What was a primary economic consequence of the Louisiana Purchase?

  • It directly caused the Panic of 1837 due to overspending.
  • It drastically expanded U.S. territory, fostering agriculture and westward expansion. (correct)
  • It led to the establishment of the Second Bank of the United States.
  • It resulted in the passage of the Sherman Antitrust Act.

What was the primary purpose of the Second Bank of the United States?

  • To regulate competition among major corporations.
  • To stabilize the economy by managing inflation and offering business loans. (correct)
  • To provide retirement pensions for workers.
  • To fund the construction of the Transcontinental Railroad.

What event highlighted the risks of a weak banking system in the 1800s?

  • The passage of the Sherman Antitrust Act.
  • The Bank War after the veto of the Second Bank recharter. (correct)
  • The creation of the Federal Reserve System.
  • The Louisiana Purchase.

What was a direct result of the Pacific Railway Act of 1862?

<p>The construction of the Transcontinental Railroad. (A)</p> Signup and view all the answers

What was the primary aim of the Sherman Antitrust Act of 1890?

<p>To break up large monopolies and promote competition. (D)</p> Signup and view all the answers

What was a key reason for the creation of the Federal Reserve System in 1913?

<p>To manage banks, control money supply, and stabilize the economy from financial panics. (C)</p> Signup and view all the answers

What was a significant approach to combatting the Great Depression?

<p>Expanding government intervention through programs like Social Security and the WPA. (A)</p> Signup and view all the answers

What specific aspect of the New Deal was addressed by the Social Security Act of 1935?

<p>Establishment of a federal pension system for retirees. (A)</p> Signup and view all the answers

What was the primary purpose of the Federal Deposit Insurance Corporation (FDIC)?

<p>To prevent future bank runs by insuring bank deposits (D)</p> Signup and view all the answers

Which significant economic shift occurred during World War II?

<p>Government control of industrial production and increased military spending. (D)</p> Signup and view all the answers

The Great Society programs of the 1960s aimed primarily at what?

<p>Reducing economic inequality and expanding social programs. (C)</p> Signup and view all the answers

What economic challenges led to government policy changes during the 1970s?

<p>High inflation and slow economic growth. (A)</p> Signup and view all the answers

What was the impact of Reaganomics in the 1980s?

<p>Economic expansion but also increasing deficits. (D)</p> Signup and view all the answers

Flashcards

World War II & War Economy

The government took control of industrial production, rationed resources, and increased military spending, leading to economic recovery and full employment.

The Great Society

President Lyndon B. Johnson expanded the government's role through programs like Medicare, Medicaid, and the War on Poverty, aiming to reduce economic inequality.

The Oil Crisis & Stagflation

High inflation and slow economic growth led the government to experiment with monetary policy changes and deregulation.

Reaganomics

President Ronald Reagan reduced government regulation, cut taxes, and promoted free-market policies, leading to economic expansion but also increased deficits.

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Evolution of U.S. Government's Role in the Economy

The U.S. government's role in the economy has evolved over time, from laissez-faire policies in the 1800s to major government interventions in the 1900s, adapting to crises, technological advancements, and public demand for regulation.

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Louisiana Purchase

A major event in 1803 where the U.S. government bought a vast territory from France, significantly expanding national land holdings and promoting westward expansion.

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Second Bank of the United States

Established in 1816 to regulate the economy and provide loans to businesses, it faced opposition from President Andrew Jackson who vetoed its recharter, leading to financial instability.

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Panic of 1837

A significant economic downturn in 1837 caused by speculative lending and lack of federal oversight, exposing the risks of a weak banking system.

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Pacific Railway Act

The government granted land and funding to private companies to build the Transcontinental Railroad in 1862, facilitating trade and migration, and strengthening the national economy.

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Sherman Antitrust Act

This act of 1890 aimed to break up monopolies (like Standard Oil) to promote competition and prevent the dominance of large businesses.

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Federal Reserve Act

Established in 1913 to regulate banks, control the money supply, and help stabilize the economy in response to financial panics like that of 1907.

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The New Deal

A series of programs implemented by President Franklin D. Roosevelt in response to the Great Depression, expanding government intervention in the economy to address widespread unemployment and economic hardship.

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Social Security Act

A key program of the New Deal, it established a federal pension system for retired workers, providing financial security in old age.

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Study Notes

Government's Role in the US Economy Throughout History

  • Government regulates markets, provides public goods, redistributes income, stabilizes economic fluctuations, and protects property rights.
  • US government involvement in the economy has significantly evolved over time.

1800s: Early Government Involvement

  • Louisiana Purchase (1803): Federal government bought Louisiana Territory from France, expanding US territory and fueling economic growth.
  • Second Bank of the United States (1816-1836): Created to stabilize the economy with loans to businesses. President Jackson opposed its recharter, causing financial instability (the "Bank War").
  • Panic of 1837: Lack of federal oversight and speculative lending after the Second Bank's collapse led to a severe economic depression.
  • Pacific Railway Act (1862): Government supported private railroad companies (Union Pacific & Central Pacific) to build the Transcontinental Railroad, boosting trade and migration.
  • Sherman Antitrust Act (1890): First federal law to break up monopolies (like Standard Oil and U.S. Steel) promoting competition.

1900s: Increased Government Regulation and Intervention

  • Federal Reserve Act (1913): Established the Federal Reserve to regulate banks, control the money supply, and stabilize the economy (response to financial panics like 1907).
  • The Great Depression & The New Deal (1929-1939): Stock market crash led to widespread unemployment and economic collapse. Roosevelt's New Deal expanded government involvement with programs like:
  • Social Security Act (1935): Established retirement pension system.
  • Works Progress Administration (WPA): Created jobs in public works projects.
  • Federal Deposit Insurance Corporation (FDIC): Protected bank deposits.
  • World War II & War Economy (1941-1945): Government controlled production, rationed resources, and increased military spending, driving economic recovery and full employment.
  • The Great Society (1960s): Johnson expanded the government's role focusing on reduced economic inequality through programs like Medicare, Medicaid, and the War on Poverty.
  • The Oil Crisis & Stagflation (1970s): High inflation and slow growth led to government experimentation with monetary policy and deregulation.
  • Reaganomics (1980s): Reagan reduced government regulation, cut taxes, and supported free market policies, leading to economic growth and increased national debt.

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