What are the causes of great economic depression
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hello mate
I m telling as much as I know ....
Causes of the Great Depression
The stock market crash of 1929. During the 1920s the U.S. stock market underwent a historic expansion. ...
Banking panics and monetary contraction. ...
The gold standard. ...
Decreased international lending and tariffs.
Hope it may helps u
I m telling as much as I know ....
Causes of the Great Depression
The stock market crash of 1929. During the 1920s the U.S. stock market underwent a historic expansion. ...
Banking panics and monetary contraction. ...
The gold standard. ...
Decreased international lending and tariffs.
Hope it may helps u
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Normally, people consume a portion of the wealth they produce, and save the rest. We'll simplify things by ignoring taxes, government expenditures, uninvested savings that go to build up cash, and foreign investment.
Most of what they save, they invest. A portion of the amount they save and invest goes to pay workers, a portion goes to capitalists for things like automotive assemblies that they need to produce their products, a portion goes to pay dividends or interest to lenders and investments, and the rest goes to the purchase of natural resources.
The money that workers, lenders, sellers of natural resources, and investors likewise is divided between consumption and savings and investment. The process is self-sustaining and self-correcting.
Entrepreneurs maintain their investment projects until they've produced the intended results, which is more production, sold at a profit.
A depression occurs when this process is disrupted. People no longer feel optimistic about investments, and especially their long-term investment projects. They abandon long-term projects, which they suddenly realize are not profitable. Even though those projects they would like to maintain cannot be because banks and investors will no longer finance them at an interest rate that is bearable. Even short-term investments, like paying workers to turn supplies into products within the year, are curtailed. Widespread losses, bank failures, and bankruptcies occur.
This can happen because of an external shock, an unexpected catastophe like a war or plague. Or it can happen because of distortions created by government or powerful criminal enterprises.
In the case of the Great Depression, it was not due to an external shock. There were no great wars or plagues. It happened because of distortions created by government (excess credit and the resulting speculation: economically unjustifiable investments based solely on the hope that another speculator will pay and even higher price).
Normally, a depression resolves itself. For example, there was a short depression in the early twenties, as the shock of excessive borrowing to finance WWI was absorbed. It ended quickly, without government intervention, the misalignments caused by wartime production were worked out, and rapid growth resumed.
But the process of correcting the mistaken investments and, after a certain delay, resuming productive investments, can be disrupted by government action.
This is what happened in the case of the Great Depression. The government instituted central planning, where prices and production decisions are determined by politicians and bureaucrats, rather than private citizens. The economy never experienced the normal correction until FDR died in 1945. After a short, normal correction, rapid growth resumed and continued until the next shock (Nixon's elimination of the gold standard, and the subsequent stagflation of the Ford and Carter years.).
MARK BRAINLIEST..
Most of what they save, they invest. A portion of the amount they save and invest goes to pay workers, a portion goes to capitalists for things like automotive assemblies that they need to produce their products, a portion goes to pay dividends or interest to lenders and investments, and the rest goes to the purchase of natural resources.
The money that workers, lenders, sellers of natural resources, and investors likewise is divided between consumption and savings and investment. The process is self-sustaining and self-correcting.
Entrepreneurs maintain their investment projects until they've produced the intended results, which is more production, sold at a profit.
A depression occurs when this process is disrupted. People no longer feel optimistic about investments, and especially their long-term investment projects. They abandon long-term projects, which they suddenly realize are not profitable. Even though those projects they would like to maintain cannot be because banks and investors will no longer finance them at an interest rate that is bearable. Even short-term investments, like paying workers to turn supplies into products within the year, are curtailed. Widespread losses, bank failures, and bankruptcies occur.
This can happen because of an external shock, an unexpected catastophe like a war or plague. Or it can happen because of distortions created by government or powerful criminal enterprises.
In the case of the Great Depression, it was not due to an external shock. There were no great wars or plagues. It happened because of distortions created by government (excess credit and the resulting speculation: economically unjustifiable investments based solely on the hope that another speculator will pay and even higher price).
Normally, a depression resolves itself. For example, there was a short depression in the early twenties, as the shock of excessive borrowing to finance WWI was absorbed. It ended quickly, without government intervention, the misalignments caused by wartime production were worked out, and rapid growth resumed.
But the process of correcting the mistaken investments and, after a certain delay, resuming productive investments, can be disrupted by government action.
This is what happened in the case of the Great Depression. The government instituted central planning, where prices and production decisions are determined by politicians and bureaucrats, rather than private citizens. The economy never experienced the normal correction until FDR died in 1945. After a short, normal correction, rapid growth resumed and continued until the next shock (Nixon's elimination of the gold standard, and the subsequent stagflation of the Ford and Carter years.).
MARK BRAINLIEST..
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