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Negative Effects of War on the Economy

Rationing during WW2..

Conclusion

To conclude, The effect of War have been impacted negatively on the Economy, because wars are many times over the roof expensive in money and other resources, they can be destructive of capital and human capital, and troublesome of trade, resource availability, and labor management.

Food rationing occurred in an attempt to regulate supply and demand. Because of the war, there was a high demand for goods such as food but there were no available resources.

Taxes..

  • In most cases, when military spending in necessary there will be a raise in taxes which in result takes money away from the households.
  • The two areas that are most affected during the war are farms and factories.

Broken Window Fallacy

Four Factors of Production

Can cause inflation which causes the rise in prices and makes it harder for the business to obtain its resources.

  • For example, with a coffee shop if prices were to go up for the cups he uses as well as coffee beans and sugar, it could be potentially hurtful towards his profit.
  • Also if prices go up than people who would be using their money on things such as food or clothes now will be able to buy less because the prices have gone up and their income has remained the same.

Guns and Butter Economic Spending

Referring to the production possibilities curve, hypothetical speaking, if the government wanted to spend ten million dollars on the military, they would have to give up on the fifteen million dollars that could of spent for the economy.

The zones of "intense destruction" (Goldstein) that are most affected during war are farms and factories. The constant violence also harms the natural resources of a specific area.

  • When land is stripped of its natural resources, it is no longer useful because it has no value towards the economy.

Ideas

World War I

The broken window fallacy is similar to war spending. The effect of the country being involved in a war diverts alot of the country's money to military spending. Although some people can argue that military spending is beneficial to the economy, the truth is that they are usually short-term and usually lead to long-term economic problems.

Aftermath of WWI

Treaty of Versailles

Europe's economy destroyed because of the great damage cause by WWI. While Germany owed a greater significant amount of debts from starting WWI of $33 billion. In order for Britain and France to rebuild their cities from war damages, the U.S. Offered loans, but when the U.S. bank began to fail, the U.S. demand their money back which create pressure for Britain and France leading to the start of the Great Depression. Mean while, Germany printed paper money which ultimately led to a severe inflation.

Ideas

World Economy Turn Down

Ideas

Stock Market Crashed

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