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Depression
The economic depression of the 1930s, known as the Great Depression, originated in the United States in 1929 and lasted until 1939. It was the longest and most severe depression in modern history, resulting in widespread unemployment, poverty, and deflation as gross domestic product and global trade fell sharply. The causes included stock market crashes, drought, declining asset prices, bank failures, debt deflation, and the Smoot-Hawley Tariff Act. Countries began recovering in the early-to-mid 1930s as they abandoned the gold standard and expanded their money supplies, with the U.S. recovery accelerating after 1933 under President Roosevelt's New Deal programs.
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Depression
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- 2. It ismore severe form of a recession It leads to extended unemployment credit defaults Broad declines in income and production Currency devaluation A high rate of business failures A nation's Gross National Product (GNP) is falling Depression :
- 3. Economic depressionbegan in 1929 & lasted in 1939 Longest & serve depression in industrialized Western World. Depression originated in United States. Many countries effected like Europe, Japan Latin America Etc. Its social & cultural effect in US was great. In US Great Depression rank second only to the Civil War. The Great Depression
- 4. There were manycauses of great depression like Deflation Problems with federal reserves Breakdown of international trade Smoot-Hawley Tariff Act Causes of Great Depression:
- 5. Debt deflation Crash of stock market Bank failure Drought conditions A fall in level of assets prices Unequal distribution of wealth Causes of Great Depression:
- 6. Nominal GDP Fell46% Real GDP Fell 33% Price Level Decline 25% Unemployment Rate Increase 4%in1929& 25% in 1933 Wholesale price index Decline 33% From Year 1919-1933
- 7. Aggregate corporateprofit in US were negative. 9,000 banks with $ 6.8 billion of deposits fail. From Year 1930-1933
- 8. Nominal & RealGDP :
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- 12. Years Countries 1928 LatinAmerica slipped slightly before the US decline in output. German economy slipped into a downturn. 1929-1930 Depression in Japan started Terms of trade decline for primary commodities 1933-1936 In France industrial production & prices both fell down. Depression in different countries :
- 13. Impact ofthe Great Depression was human suffering. For short period of time world output and standards of living dropped. One fourth of the labor force was unable to find work. End of the international gold standard. Economic Impact :
- 14. The U.S.recovery began in the spring of 1933 Output grew rapidly in the mid-1930s Real GDP rose at an average rate of 9 percent per year between 1933 and 1937. The British economy stopped declining soon after Britain’s abandonment of the gold standard in September 1931. The economy of Latin American began to strengthen in late 1931 and early 1932. Recovery from Depression :
- 15. Recovery inthe rest of the world varied greatly. Germany and Japan both began to recover in the fall of 1932. Canada and many smaller European countries started to recover early in 1933. France, which experienced severe depression later than most countries, did not firmly enter the recovery phase until 1938. Recovery from Depression :
- 16. Currency devaluations Monetary expansion became the leading sources of recovery in the world There is a notable correlation between the time countries abandoned the gold standard and renewed growth in their output. Sources of Recovery :
- 17. Britain, whichwas forced off the gold standard in September 1931, recovered relatively early then US. The United States, which did not effectively devalue its currency until 1933 recovered substantially later. Example :
- 18. Devaluation didnot increase output directly. It allowed countries to expand their money supplies without concern about gold movements and exchange rates The American money supply increases to 42% in 1933-1937. Devaluation :
- 19. Fiscal policyplayed a relatively small role in stimulating recovery in the United States. Indeed, the Revenue Act of 1932 increased American tax rates greatly. It balance the federal budget. It discouraging spending. A New Deal, initiated in early 1933, did include a number of new federal programs aimed at generating recovery. Fiscal Policy :
- 20. In early1933, did include a number of new federal programs aimed at generating recovery. The Works Progress Administration (WPA) hired the unemployed to work on government building projects. Agricultural Adjustment Administration (AAA) gave large payments to farmers. However, the actual increases in government spending and the government budget deficit were small relative Fiscal Policy :
- 21. Role of FiscalPolicy:
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