Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that began in 1929 and lasted through the late 1930s, marked by unprecedented levels of unemployment, plummeting consumer demand, and widespread bank failures. This period had significant implications for income distribution and the role of government intervention in the economy as nations struggled to address the dire consequences of the economic collapse.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the stock market crash on October 29, 1929, also known as Black Tuesday, which wiped out millions of investors.
2. During the Great Depression, unemployment rates soared to around 25% in the United States, leading to widespread poverty and hardship for millions of families.
3. The economic crisis caused numerous banks to fail, leading to a loss of savings for many individuals and a lack of trust in financial institutions.
4. In response to the Great Depression, many governments increased their role in the economy through interventions such as public works programs and social safety nets.
5. The Great Depression had lasting effects on economic policies, leading to greater acceptance of government intervention in managing economic fluctuations.

Review Questions

• How did the Great Depression impact income inequality during its duration?
  • The Great Depression significantly exacerbated income inequality as unemployment soared and many individuals lost their livelihoods. The economic downturn disproportionately affected lower-income families, while wealthier individuals often had more resources to weather the storm. As jobs became scarce, those at the bottom of the income distribution faced severe hardships, leading to wider gaps between socioeconomic classes.
• In what ways did government intervention change during and after the Great Depression?
  • Government intervention expanded dramatically during and after the Great Depression as policymakers recognized the need for active measures to stabilize the economy. Initiatives like the New Deal introduced various programs aimed at job creation, infrastructure development, and financial reforms. These changes marked a shift in public policy where governments took on a more proactive role in managing economic stability and protecting citizens from future crises.
• Evaluate the long-term effects of the Great Depression on modern economic policy and government roles in economies.
  • The Great Depression fundamentally changed modern economic policy by fostering a greater acceptance of government intervention as necessary for economic stability. It led to established frameworks for fiscal policy and monetary regulation that are still relevant today. The crisis also resulted in enhanced social safety nets and regulations on financial markets aimed at preventing similar downturns, shaping how governments respond to economic fluctuations in contemporary settings.

Related terms

Stock Market Crash of 1929: The sudden and dramatic decline in stock prices that marked the beginning of the Great Depression, leading to widespread financial panic and loss of savings.

New Deal: A series of programs and policies implemented by President Franklin D. Roosevelt aimed at providing relief, recovery, and reform in response to the Great Depression.

Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment, which reached historic highs during the Great Depression.