It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.
The Great Depression of 1929 devastated the U.S. economy. A third of all banks failed.1 Unemployment rose to 25%, and homelessness increased.2 Housing prices plummeted, international trade collapsed, and deflation soared.3 It took 25 years for the stock market to recover.
While the Great Depression took a huge toll on the U.S., there were a few good things that came from it. For example, the New Deal programs installed safeguards to make it less likely that the Depression could happen again.
Overall, the Great Depression had a tremendous impact on nine principal areas of the U.S. economy, which are outlined below.
Explanation:
During the first five years of the depression, the economy shrank by 50%. In 1929, economic output was $105 billion, as measured by gross domestic product (GDP). That's equivalent to more than $1 trillion today.4
The economy began shrinking in August 1929. By the end of the year, one-third of all banks had failed.1 In 1930, the economy shrank by another 8.5%, according to the Bureau of Economic Analysis (BEA). GDP growth declined 6.4% in 1931 and 12.9% in 1932. By 1933, the country had suffered at least four years of economic contraction. It only produced $57.2 billion, half what it produced in 1929.5
Part of the contraction was due to deflation. According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI), which is used as a measure of inflation, fell by 25% between 1929 and 1933.6 Falling prices sent many firms into bankruptcy.
New Deal spending boosted GDP growth by 10.8% in 1934. It grew by another 8.9% in 1935, 12.9% in 1936, and 5.1% in 1937.
Unfortunately, the government cut back on New Deal spending and the depression returned, causing the economy to shrink by 3.3% and the unemployment rate to jump to 19% in 1938.7
Preparations for World War II sent growth up by 8% in 1939 and by 8.8% in 1940. The next year, Japan bombed Pearl Harbor, and the United States entered World War II. Annual GDP growth jumped to 17.7%.8
The New Deal and spending for World War II shifted the economy from a pure free market to a mixed economy. It depended much more on government spending for its success. The timeline of the Great Depression shows this was a gradual—though necessary—process.
Answers & Comments
Answer:
It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.
Explanation:
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Answer:
The Great Depression of 1929 devastated the U.S. economy. A third of all banks failed.1 Unemployment rose to 25%, and homelessness increased.2 Housing prices plummeted, international trade collapsed, and deflation soared.3 It took 25 years for the stock market to recover.
While the Great Depression took a huge toll on the U.S., there were a few good things that came from it. For example, the New Deal programs installed safeguards to make it less likely that the Depression could happen again.
Overall, the Great Depression had a tremendous impact on nine principal areas of the U.S. economy, which are outlined below.
Explanation:
During the first five years of the depression, the economy shrank by 50%. In 1929, economic output was $105 billion, as measured by gross domestic product (GDP). That's equivalent to more than $1 trillion today.4
The economy began shrinking in August 1929. By the end of the year, one-third of all banks had failed.1 In 1930, the economy shrank by another 8.5%, according to the Bureau of Economic Analysis (BEA). GDP growth declined 6.4% in 1931 and 12.9% in 1932. By 1933, the country had suffered at least four years of economic contraction. It only produced $57.2 billion, half what it produced in 1929.5
Part of the contraction was due to deflation. According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI), which is used as a measure of inflation, fell by 25% between 1929 and 1933.6 Falling prices sent many firms into bankruptcy.
New Deal spending boosted GDP growth by 10.8% in 1934. It grew by another 8.9% in 1935, 12.9% in 1936, and 5.1% in 1937.
Unfortunately, the government cut back on New Deal spending and the depression returned, causing the economy to shrink by 3.3% and the unemployment rate to jump to 19% in 1938.7
Preparations for World War II sent growth up by 8% in 1939 and by 8.8% in 1940. The next year, Japan bombed Pearl Harbor, and the United States entered World War II. Annual GDP growth jumped to 17.7%.8
The New Deal and spending for World War II shifted the economy from a pure free market to a mixed economy. It depended much more on government spending for its success. The timeline of the Great Depression shows this was a gradual—though necessary—process.
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