Questions and Answers
What was a major cause of the surplus of goods during the Great Depression?
Underconsumption of goods
What was a consequence of the stock market speculation during the Great Depression?
A massive loss of wealth
What was a result of the credit crisis during the Great Depression?
People and businesses were unable to pay their debts
What was a weakness in the banking system that contributed to the Great Depression?
Signup and view all the answers
What global economic condition made it difficult for countries to recover from the collapse of international trade?
Signup and view all the answers
What was a factor that further exacerbated the economic downturn?
Signup and view all the answers
Study Notes
Causes of the Great Depression
Economic Factors
- Overproduction and Underconsumption: Many industries produced more goods than people could afford to buy, leading to a surplus of goods and a decrease in demand.
- Stock Market Speculation: Many Americans invested heavily in the stock market, leading to a bubble that eventually burst, causing a massive loss of wealth.
- Credit Crisis: Many people and businesses bought on credit, leading to a credit crisis when they couldn't pay their debts.
- Weak Banking System: Many banks invested heavily in the stock market and gave out loans to speculators, leaving them vulnerable to collapse.
Global Economic Conditions
- Global Economic Downturn: The global economy was already experiencing a downturn, making it difficult for countries to recover from the collapse of international trade.
- Protectionist Trade Policies: The passage of the Smoot-Hawley Tariff Act in 1930, which raised tariffs on imported goods, is also seen as a contributing factor to the Great Depression.
Other Factors
- Drought and Agricultural Decline: A severe drought in 1930 led to a decline in agricultural production, further exacerbating the economic downturn.
- Monetary Policy: The Federal Reserve, the central bank of the United States, raised interest rates in 1928 and 1929, reducing borrowing and spending.
These factors combined to create a perfect storm that led to the Great Depression, a global economic downturn that lasted for over a decade.
Causes of the Great Depression
Economic Factors
- Overproduction and underconsumption led to a surplus of goods and a decrease in demand, as many industries produced more goods than people could afford to buy.
- Stock market speculation caused a massive loss of wealth when the bubble burst, as many Americans invested heavily in the stock market.
- A credit crisis occurred when people and businesses bought on credit, leading to a crisis when they couldn't pay their debts.
- The weak banking system left many banks vulnerable to collapse, as they invested heavily in the stock market and gave out loans to speculators.
Global Economic Conditions
- The global economy was already experiencing a downturn, making it difficult for countries to recover from the collapse of international trade.
- The passage of the Smoot-Hawley Tariff Act in 1930, which raised tariffs on imported goods, is seen as a contributing factor to the Great Depression.
Other Factors
- A severe drought in 1930 led to a decline in agricultural production, further exacerbating the economic downturn.
- The Federal Reserve's decision to raise interest rates in 1928 and 1929 reduced borrowing and spending, contributing to the Great Depression.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
