Brief Overview on the Great Depression

There are no clear causes of the Great Depression although a number of theories have been brought out by different people. Most people belief that the Great Depression was caused by the stock market crash in October 29, 1929 popularly known as the Black Tuesday. Monetarist and historians hold different views concerning the causes of the Great Depression.  According to historians, the Great Depression was caused by structural factors such as the stock market crash and bank failures. On the other hand, monetarists’ economists believe that the Great Depression was caused by several monetary factors such as US Federal Reserve actions that were contracting the money supply, and the decision by the Britain to return to the Gold Standard at pre-WW1 parties. Others believed that this problem was caused by the failure of free markets, while others believed that it was the government failure that contributed to the problem.

The New Deal attempted to combat the depression in two ways. The first New Deal attempted to end the depression by reconstructing the economy from the top down.  During the first New Deal, industrial sectors were encouraged to sell their products at low costs and avoid stiff competition, but in the long run, it resulted in increased unemployment. The second New Deal tried to end the depression by reconstructing the economy from bottom up. In the second New Deal, government used it funds to convert non-consumers to consumers again.

Although it is not clear whether it is World War II or New Deal or both that lend to the end of the Great Depression, most of economic historians consider WWII as the main factor that gave way to the end of Depression. According to economic historians, government spending on the war accelerated recovery from Depression as well as reducing unemployment.

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