Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by significant declines in industrial output, widespread unemployment, and a collapse of financial markets. Its onset was triggered by the stock market crash of 1929 and had lasting effects on economies around the globe, influencing labor relations and financial regulations.

5 Must Know Facts For Your Next Test

1. The Great Depression led to an estimated unemployment rate of around 25% in the United States at its peak.
2. Bank failures were rampant during this time, causing many people to lose their savings and further exacerbating the economic crisis.
3. The agricultural sector was hit hard, with many farmers losing their land due to debt and drought conditions, contributing to the Dust Bowl.
4. International trade plummeted as countries imposed tariffs to protect their own economies, worsening the global economic situation.
5. The Federal Reserve's monetary policy decisions during the early years of the Great Depression are often criticized for worsening the economic downturn.

Review Questions

• How did the stock market crash of 1929 contribute to the onset of the Great Depression?
  • The stock market crash of 1929 acted as a trigger for the Great Depression by severely undermining public confidence in the economy. As stock prices plummeted, investors lost significant wealth, leading to decreased consumer spending and a ripple effect through various industries. This sharp decline in economic activity resulted in widespread business failures and increased unemployment rates, ultimately plunging the nation into a deep economic crisis.
• What role did bank failures play in deepening the economic struggles experienced during the Great Depression?
  • Bank failures were a critical factor that exacerbated the economic struggles of the Great Depression. As banks collapsed, countless individuals lost their life savings, leading to a loss of consumer confidence. With banks unable to provide loans, businesses struggled to finance operations or expand, which contributed to higher unemployment rates and a stagnant economy. The widespread distrust in financial institutions significantly hampered economic recovery efforts during this period.
• Evaluate how the New Deal addressed the challenges posed by the Great Depression and its effectiveness in promoting economic recovery.
  • The New Deal was a comprehensive set of programs aimed at addressing the dire challenges posed by the Great Depression. It focused on providing immediate relief for those suffering from unemployment and poverty while implementing reforms designed to prevent future economic crises. Programs such as Social Security and various public works initiatives helped stabilize the economy and restore confidence among citizens. Although opinions on its effectiveness vary, many argue that the New Deal laid important groundwork for modern social welfare policies and helped mitigate some of the worst effects of the Great Depression.

Related terms

Stock Market Crash: A rapid decline in stock prices that occurred in late October 1929, serving as a major catalyst for the Great Depression.

Unemployment: The state of being jobless and actively seeking work, which soared during the Great Depression as businesses failed and economic activity slowed.

New Deal: A series of programs and policies implemented by President Franklin D. Roosevelt to provide relief, recovery, and reform during the Great Depression.