The Great Depression started in 1929 and lasted until 1941. It was one of the worst economic problems in the United States. It first started when stock prices began to fall on September 4, 1929. Then the press announced the stock falls of October 29, 1929, known as Black Tuesday. The Gross Domestic Product rate (GDP) of America decreased by 15%.
Other countries, including Great Britain, France, and Germany, were affected by the Great Depression. Recessions happen when stock prices fall at a certain level, then recover shortly after. Once a recession continues to fall, it becomes a depression.
The Great Depression caused income, profits, and prices to become extremely low. It caused unemployment rates to spike, leaving people without jobs or money to support their families. Farming, logging and mining companies struggled the most. There are many theories on why the Great Depression happened. Two of which are the Keynesian and the Monetarist Explanation. The Keynesian Explanation states that the aggregate expenditure, the sum of all national income, was low. This means there were less net imports and exports.
Plus there was less house consumption and less government spending. Basically, the country wasn’t getting enough profit from trade and the government was spending more money than they should. The Monetarist Explanation states that there was a banking crisis that caused one-third of all banks to close down.
A reduction in bank wealth and deflation. The banks lowered their interest rates because of this. The Federal Reserve waited for some banks to collapse before they could interfere. They provided all banks with 40% of their gold, to help prevent deflation and increase their bank wealth. The Great Depression for the US ended in 1933. The GDP for America started to recover, but unemployment rates were still high.
For some countries, their GDP started to recover during the beginning of World War II.