The Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, characterized by massive unemployment, a dramatic decline in industrial production, and significant deflation. It was triggered by the stock market crash of 1929, leading to a profound crisis in financial markets, impacting both businesses and consumers, and reshaping the American economic landscape through increased government intervention and reforms.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the stock market crash on October 29, 1929, known as Black Tuesday, which wiped out billions in wealth.
2. At its peak, unemployment in the United States reached around 25%, leaving millions of families struggling to survive.
3. The economy saw a significant drop in GDP, with industrial production decreasing by nearly half during the early years of the depression.
4. Farmers faced enormous challenges due to falling crop prices and severe droughts, which led to widespread agricultural devastation known as the Dust Bowl.
5. The response to the Great Depression included significant government reforms and regulatory measures aimed at preventing future economic collapses, like the Securities Act of 1933.

Review Questions

• How did stock market speculation contribute to the onset of the Great Depression?
  • Stock market speculation played a crucial role in leading to the Great Depression as many investors engaged in risky practices, driving stock prices to unsustainable highs. The belief that stock prices would continue to rise encouraged excessive borrowing and investment without proper consideration of risks. When the market crashed in 1929, it exposed these speculative practices and resulted in a rapid loss of confidence, triggering a chain reaction that led to business failures and economic collapse.
• Analyze the impact of bank failures during the Great Depression on everyday Americans.
  • Bank failures during the Great Depression had a devastating impact on everyday Americans, as millions lost their life savings when banks collapsed. The failure of financial institutions not only caused immediate financial distress but also led to a widespread loss of trust in the banking system. This crisis forced many people to resort to bartering and cash-only transactions, while also leading to changes in banking regulations to protect depositors and restore confidence in financial institutions.
• Evaluate how the New Deal represented a shift in government policy in response to the economic conditions created by the Great Depression.
  • The New Deal represented a significant shift in government policy as it marked a move towards active government intervention in the economy to address the challenges posed by the Great Depression. Previously, there was a belief in limited government involvement; however, Roosevelt's administration implemented various programs aimed at economic recovery, job creation, and social safety nets. This included establishing agencies like the Civilian Conservation Corps (CCC) and Social Security Administration, fundamentally changing the relationship between Americans and their government by emphasizing federal responsibility for economic welfare.

Related terms

Stock Market Crash of 1929: A sudden and severe decline in stock prices that marked the beginning of the Great Depression, causing widespread panic and loss of wealth.

New Deal:

A series of programs and reforms introduced by President Franklin D. Roosevelt in response to the Great Depression aimed at economic recovery and social reform.

Bank Failures: The collapse of numerous banks during the Great Depression, leading to widespread loss of savings and further exacerbating the economic crisis.