explain the cause of great depression for five marks.
Answers
1. Ensuing Global crisis ......
2.the stock market crash.....
3.the dust bowl ....
4.the Smoot - Hawely Tarrif......
1. Stock Market Crash of 1929 - Many believe erroneously that the stock market crash that occurred on Black
Tuesday, October 29, 1929was 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.
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.
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.
4. American Economic Policy with Europe - As businesses began failing, the government created the Smoot-Hawley
Tariff 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 was of such proportions that many could not even pay their taxes or other debts and had to
sell their farms. The area was nicknamed "The Dust Bowl."