The Great Depression began after a period of economic growth and optimism in the 1920s. Speculation was rampant and many believed the boom would continue indefinitely. However, on October 29, 1929, the stock market crashed, marking the beginning of a decade long economic decline. GDP was halved, unemployment rose to 25%, farm prices and incomes dropped sharply. Several factors contributed to the depression, including uneven economic growth that did not benefit all sectors, high consumer debt levels, overproduction, and an unstable construction industry. Government policies also exacerbated problems through high tariffs, a regressive tax system, and lax financial regulations. President Hoover's policies failed to stimulate the economy or stabilize international finance. It was not until Roosevelt
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Presentation reviewing Divergence, Big Time by Lant Prichet (2007). The article shows that while theory suggests that diminishing returns will cause national economies to converge over time, reality present a different picture.
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Presentation reviewing Divergence, Big Time by Lant Prichet (2007). The article shows that while theory suggests that diminishing returns will cause national economies to converge over time, reality present a different picture.
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Great Depression of the American Economy
Great Depression was an austerely down trend in the economic activity of the world in the decade foregoing World War II. The time duration or rather the time for the Great Depression Was not fixed. It varied from countries to countries. However, in many countries it was experienced in the year 1930 and it lasted till the midst of 1940. The time duration for the Great Depression was for a longer period of time and it was considered the longest as well as the deepest depression of the twentieth century
The beginning point of the Depression was the fall or the crash in the stock market in U.S. The fall in the prices of stock began in the year 1929 on 4th September and the stock market crashed on the 29th of October in the year 1929. This day was known as the Black Tuesday.
The Great Depression affected severely all the sections and the class of the society in the countries including the rich and the poor. Profit Margin and the prices of the goods and services severely dropped and if the amount of revenue and taxes collected also had a devastating fall which had severe negative effect on the economy. The level of Unemployment rose in U.S. and it was depicted that around twenty percent of unemployment rate increased in U.S. whereas, in other countries the level of Unemployment rose to thirty three percent which was the highest ever increase in the rate of the unemployment process.
All the cities around the world were suffering due to this depression and especially those cities or countries whose backbone was heavy industry, construction industries because this industry totally turned downed and halted in various countries. Due to the depression the agriculture sector was also effected as because the prices of the crop also fell to around sixty percent.
Due to unemployment the primary sector was also affected, activities such as mining, logging and cash cropping was effected a lot.
There were various causes for the depression in the year 1929. These comprised of the primary weaknesses and definite events that led to a major depression and the way in which the severe depression profused from country to country was simply devastating. According to the historians the main cause or the real reason behind the great depression was failure of the bank and the crash or the fall of the stock market. However, the various monetarist economist such as Milton Friedman, Peter Temin and Barry Eichengreen states that the major cause behind the depression was the inappropriate action considered or adopted by the US Federal Reserve and the limited supply of the money and the decision of Britain for returning of gold standard before the World War.
The activity of business and the period of Boom and depression in the business and recession are considered or rather regarded as the normal activity for the business and are considered normal. However, what are t.
The Great Depression - Presentation (Macroeconomics Perspective)Arjun Parekh
This brief presentation on 'The Great Depression' has been made from the point of view of understanding Macroeconomic factors that played an important role.
The presentation tells about all the aspects that led to the great economic depression in 1929. All the historical, financial and other factors are looked upon with the help of online available data.
Explain how the current economic recession differs from the depressio.pdfrozakashif85
Explain how the current economic recession differs from the depression in the 1930\'s.
Solution
The Great depression was worldwide. It was due to the collapse of the international financial
system It also resulted from the mutual adoption by many countries ( including USA) of high-
tariff policies, which were intended to keep out foreign goods in order to protect domestic
producers. The policies were called \"beggar thy neighbour\" strategies since they attempted to
\"export\" unemployment by improving one country\'s trade position and hence demand for its
goods at the expense of its trading partners And , of course, if each country keeps out foreign
goods, the volume of world trade declines, providing a contractionary influence on the world
economy
Almost every country suffered a deep recession in the 1930s, but some countries did better than
USA Sweden began an expansionary policy in the early 1930s and reduced its unemployment
relatively quicker Britain\'s economy suffered high unemployment but in 1931 it went off the
gold standard and the ensuing devaluation of the pound sterling set the stage for some
improvement. Germany grew rapidly after Hitler came to power and expanded government
spending. China escaped the recession until after 1931, because it had a floating exchange rate.
In 1938, real GNP in US rose above its 1929 level for the first time in the decade, but it was not
until 1942 , after the US formally entered world war II , that the unemployment rate finally fell
below 5%
The experience of the US in the early 1980s- the worst recession since the Great Depression,
casts doubt on the optimistism of recovery. During the 1980s, the US experienced the largest
sustained budget deficits in its peacetime history. Even so cutting spending or raising taxes was
not politically popular. Gradually, in the 1990s, the deficit began to be brought under control,
and toward the end of the decade the budget swung into surplus.This was due to raising the
prices and government spending.
By,
Nishant Bhatt.
Explain how the current economic recession differs from the depressio.pdf
The Great Depression
1. The Great Depression.
The end of the mild depression in the US market in 1920-21 was followed by a period of
intense growth and optimism. The economy grew at a phenomenal rate- the GNP saw a
growth rate of 4.7% and the per capita income increased by 28% . This was a time rife
with speculation and investment in what has been later referred to as the ‘speculative
mania’. There was a general optimism and it was believed that this boom would continue.
However by the end of the 1929 and 1930 the economy witnessed a sharp decline. This
situation was to continue for the next 10 years.
On October 29th 1929 the industrial index fell by 43 points bringing an end to the
previous run of good times. The financial institutions started failing by October 1930.
The U.S GDP was halved from $ 103Bln. to $ 55Bln, GNP declined by 25% the CPI fell
by 25% and the WPI by 32%. Unemployment was 25% and the prices of farming real
estate dropped. This period is referred to as the great depression in the economic history
of US.
A number of factors contributed to the great depression.
First, to examine the so-called boom The phenomenal growth in the US economy was
merely superficial. It had not trickled down and not all sectors gained from it.
1) The agricultural and farm sector was suffering even during the time of the boom. Per
capita income had only increased by 10% in this sector and the farm prices had fallen.
The farm mortgage debt had also increased. Thus there was a disparity in the income of
the people.
2)The purchasing power of the people was highly skewed. At the same time capital
investment was still increasing leading to increased production which could not be
supported by demand. The majority of the economy’s money was being generated from
the automobile and construction Industry where consumption had already begun falling
by 1929.
3)The middle class was borrowing heavily and this led to a fall in the liquidity of the
banks. As a result the banks were not able to sustain themselves during the slump.
4) The boom period had also seen heavy investments in construction which is a very
unstable investment.
5)The American economy was largely dependent on foreign trade majority of which was
European. The European market by itself however was not such a stable economy.
Secondly, the Government policies contributed a great deal.
1)The tax system was one that contributed to the income disparity rather than removing
it.
2)The regulations on the financial institutions were lax resulting in irresponsible
speculation by the banks.
3)The Government had restricted foreign trade by imposing high tariffs. As a result the
export of the economy went down till the only foreign trade was only with the ones that
were subsisting on US loans.
2. 4)The Federal bank decreased the interest rate to 4% in 1930 resulting in such low rates
for deposits that checking and savings deposits fell by almost 33% causing the liquidity
to go down further for the banks which were already hard hit. The result was that a
number of banks had to close down.
In the farms a situation that was already dire was made more so by the stock market
crash, millions of people lost their jobs. The middle class that was sustaining its
speculation on loans now were pushed to below the poverty level. Farms were foreclosed
and people started to migrate from the farms to the cities or to other farms working at
extremely low wages. They became dependent on the local welfare system. However that
also failed as the local authorities cut the welfare or stopped it altogether. The suicide rate
increased drastically during this time.
The rectification policies adapted by the Government during this time also proved highly
ineffective. Hooover, The then President believed that the Government should play an
important role in stabilizing the economy. His initial efforts to stimulate employment
failed. He became convinced that the structure of the International finance was to be
blamed for the depression. As a result he concentrated on the International market instead
of trying to fix the situation back home which prolonged the Depression.
The answer to the depression was provided by Keynes who called upon the government
to pick up the slack by making huge investment and tax cuts. His basic idea was simple:
to keep people fully employed, governments have to run deficits when the economy is
slowing because the private sector will not invest enough to increase production and
reverse the recession. It was only after Roosevelt was inaugurated 1933 that he started
putting in place some policies which had some effects to rectify the situation. His initial
reforms and recovery measures were called the New Deal which tried to increase wages
and hence purchasing power. This was followed by a number of other policies. By May
1938 retail sales began to increase, employment improved, and industrial production
turned up after June 1938.However, only the mobilization that followed U.S.'s entry into
World War II finally brought an end to the Depression