The New Deal Established by Roosevelt, Essay Example

The major event that pulled the United States out of the Great Depression was the revival of the New Deal established by Roosevelt. This established the need for the political development of financial planning in addition to government interventions that would allow banks to reopen and business in the country to begin to return back to normal. Another important event that ended the Great Depression was World War II. The production necessary to accommodate European allies made the country a lot of money that helped compensate for the losses that were experienced during the Depression.

According to the above data, the major mistake that was made during the Great Depression was the number of banks that were allowed to fail. While many banks failed during the recession, safeguards have been put in place that prevent the results seen from being too dramatic. Because these same safeguards were not in place during the Great Depression, the change in money supply, inflation, longevity pf business downturn, and other factors were altered significantly.

The rapid money growth is having a significant impact on GDP because people are spending the money they receive as quickly as possible, which is stimulating the economy. On the other hand, this leads to a rapid increase in prices which makes people worried that they should spend their money now in order to acquire items for a less expensive price. This is marked by high inflation that is likely to continue if these practices are to continue as well.

The long term concern of the recent money supply growth is that it will cause inflation to remain high, while other aspects of the monetary system are unable to accommodate this growth. Products and services will become expensive, while the paychecks that people receive will be the same, preventing them from being able to live the same lifestyle they should on their salaries.

The exit strategy involves normalizing the economy by ceasing to reinvest funds from the treasury and other federal sources into the economy at such a fast rate. In addition the Federal Reserve would begin to sell assets, which would lower the GDP but normalize the economy in the process. These are the actions that the Federal Reserve are expected to take in order to achieve these goals.

The major risk of this exit strategy plan is that it will have the opposite effect that is intended. It is clear that these actions will stop GDP growth, but it is valuable for the GDP to be stable. It is necessary to balance the exit strategy actions in a manner that does not lower the GDP too significantly because this will threaten the stability of the economy, which is arguably as detrimental as a recession. Ultimately, these actions are meant to mimic some aspects of a recession, so it is difficult to tell what the long-term impact of them will be.