Question

Cause of great economic depression

Answer 1

Here are some causes of the Economic Great Depression

1. Stock Market Crash of 1929 - Many believe erroneously that the stock market crash that occurred on Black

Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that

led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40

billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not

enough and America truly entered what is called the Great Depression.

2. Bank Failures - Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks

failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own

survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less

expenditures.

3. Reduction in Purchasing Across the Board - With the stock market crash and the fears of further economic woes,

individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced

and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items

they had bought through installment plans and their items were repossessed. More and more inventory began to

accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the

economic situation.

4. American Economic Policy with Europe - As businesses began failing, the government created the Smoot-Hawley

Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade

between America and foreign countries along with some economic retaliation.

5. Drought Conditions - While not a direct cause of the Great Depression, the drought that occurred in the

Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms.

Answer 2

It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.

Hope it helps you dear.....xd