Black Tuesday: The Most Important Factors Leading To The Great Depression
The Stock Market Crash, also know as Black Tuesday, was the most important factor that led to the Great Depression. In the late 1920s the stock prices had gains of 25 percent, 38 percent in 1938, and 30 percent until late 1929. Followed by these gains was the crash in October of 1929 when the stock price declined immensely before bottoming out in 1929. Overall the total deficit during the four year period from 1929 to 1932 was 82 percent. The stock market crash caused an accelerated decline in the economic output in the United States for a few reasons. First, with the decline in stock prices close to $20 billion, household wealth was reduced per person. Second, the stock prices reduced the market value for new capital goods, meaning a reduction
in the demand for new for factories. Third, a rise in uncertainty arose about the future of the economy. This would cause two effects, a rise in demand for money that would put pressure on the interest rates lowering the velocity of money. Also, there would be reductions across the board in purchasing of governments and population as stated in the above paragraphs.
in the demand for new for factories. Third, a rise in uncertainty arose about the future of the economy. This would cause two effects, a rise in demand for money that would put pressure on the interest rates lowering the velocity of money. Also, there would be reductions across the board in purchasing of governments and population as stated in the above paragraphs.