Causes and Effects of the Great Depression

The Great Depression was a pivotal period in American history, characterized by severe economic hardship and social upheaval. This page outlines the major causes and effects of this unprecedented economic crisis.

Causes of the Great Depression

Several factors contributed to the onset and severity of the Great Depression:

1. Stock Market Crash of 1929: The sudden collapse of inflated share prices on "Black Thursday" led to the sale of 16 million shares at a fraction of their original value.

2. Decline in Economic Confidence: The market crash severely eroded public and investor confidence in the economy.

3. Government Policies: Certain governmental decisions and policies exacerbated the economic downturn.

4. Bank Failures: The collapse of numerous banks further destabilized the financial system.

5. Overproduction and Underconsumption in Agriculture: Farmers faced falling prices due to excess production and reduced demand.

Highlight: The 7 causes of the Great Depression included the stock market crash, loss of economic confidence, government policies, bank failures, agricultural crisis, overproduction, and underconsumption.

Effects of the Great Depression

The consequences of the Great Depression were far-reaching and affected various segments of society:

1. Unemployment: By 1932, unemployment peaked at nearly 6 million, with over half of young people and 40% of factory workers jobless.

2. Agricultural Impact: Farmers were hit hard by falling prices, forcing them to resort to old methods like ploughing by hand.

3. Business Closures: Many businesses shut down, unable to survive the economic downturn.

4. Homelessness: A drastic rise in homelessness led to the establishment of large tent camps.

5. Relief Efforts: Lodgings and soup kitchens were set up to assist the unemployed and homeless.

6. Food Prices: Paradoxically, food prices remained high to prevent farmers from falling deeper into depression.

Example: The agricultural impact during the Great Depression was severe, with farmers struggling to maintain their livelihoods due to falling crop prices and reduced demand.

Vocabulary: Underconsumption refers to a situation where the demand for goods and services is insufficient to sustain economic growth, which was a significant factor during the Great Depression.

This comprehensive overview highlights the complex interplay of economic and social factors that defined the Great Depression era in America.