Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, characterized by significant declines in industrial output, widespread unemployment, and deflation. It fundamentally altered the American economy and led to significant changes in government policies, especially regarding the role of the federal government in economic affairs and the implementation of social safety nets.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the Stock Market Crash of 1929, leading to bank failures and a massive loss of consumer confidence.
2. At its peak, unemployment reached about 25% in the United States, drastically impacting families and communities across the country.
3. The federal government expanded its role in the economy during the Great Depression, implementing policies aimed at stabilizing financial markets and providing direct relief to citizens.
4. The New Deal introduced various programs like the Civilian Conservation Corps (CCC) and the Public Works Administration (PWA) to create jobs and stimulate economic growth.
5. The Great Depression had global repercussions, contributing to political instability in Europe and influencing the rise of extremist movements.

Review Questions

• How did the Great Depression influence changes in the role of the presidency in American government?
  • The Great Depression led to a significant expansion of presidential power as the federal government intervened more directly in economic affairs. Franklin D. Roosevelt's New Deal programs redefined the role of the presidency by introducing numerous initiatives aimed at economic recovery and social welfare. This shift set a precedent for future presidential involvement in managing economic crises and established expectations for government responsibility towards citizens' well-being.
• Analyze how fiscal policies were affected by the economic challenges posed by the Great Depression.
  • The Great Depression prompted a reevaluation of fiscal policies as the government sought to combat severe economic decline. The implementation of expansive fiscal measures included increased government spending on public works and social programs aimed at stimulating demand and reducing unemployment. This represented a shift from previous laissez-faire approaches, leading to a more active role for government intervention in managing economic cycles.
• Evaluate the long-term impacts of the Great Depression on American fiscal policy and government budgeting practices.
  • The long-term impacts of the Great Depression significantly reshaped American fiscal policy and government budgeting practices. It established a precedent for using counter-cyclical fiscal policies during economic downturns, where increased government spending is employed to counteract falling demand. Additionally, it led to structural changes such as the creation of social safety nets like Social Security, which influenced budgetary priorities and expanded discussions about welfare state responsibilities in subsequent decades.

Related terms

New Deal:

A series of programs and policies instituted by President Franklin D. Roosevelt aimed at recovering the economy from the Great Depression through relief, recovery, and reform.

Stock Market Crash of 1929: The dramatic collapse of stock prices in October 1929 that marked the beginning of the Great Depression, causing widespread financial panic and loss of wealth.

Social Security Act:

A landmark piece of legislation enacted in 1935 that established a social insurance program designed to provide financial assistance to the elderly, unemployed, and disadvantaged.