What Caused The Great Depression
One of the most debated topics in history is how the economy goes through ups and downs. How depressions and periods of wealth and prosperity cycle. At the head of all these debates one of the major examples and what caused it is the American depression between 1929 and 1940, or simply know today as The Great Depression. The Great Depression was the most infamous and arguably the worst period of economic depression in the United States.The Great Depression was caused by inflation, the stock market crash, and the failure of the banking system in America known as the bank panics. One of the reasons the great depression happened was due to the stock market crash of 1929, known as Black Thursday, and events leading up to the stock market crash.
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Inflation happens when the cost of living goes well beyond the average person's income in that location. In periods leading up to the great depression costs went up dramatically, yet people still made the same amount of money. This is known as inflation and can be contributed to overspending in periods of prosperity, government deficits, etcetera. (“Chapter 16: Inflation and Recession” 4 ). This shows that this is one of the contributing factors to the Great Depression by explaining why people had no money. This is important because when the cost of living went up, companies could not afford to pay their workers more, further attributing to the rise of poverty. “For example, if the cost of oil increases, the added cost of production for a factory would increase. If a company cannot afford to absorb the added cost of production then the price of the finished product would increase. When many companies are affected by the rising costs of production then inflation would set in. Periods of so-called double-digit inflation occurred between 1917 and 1921, in 1932...” (“Chapter 16: Inflation and Recession” 4). This shows an example of how the rising costs of almost anything can directly change the costs of living. Even though people were not buying raw oil, when oil prices went up, the cost to build a factory went up, when the cost of the factory went up, the goods produced there prices went up, and the prices went up for the people. This is important because people were not compensated for these changes by their jobs, and by the time people realized this, the stock market had crashed and there was no money left to compensate. Overall, inflation had a huge role in causing the Great Depression. If it were not for inflation, it is possible the Great Depression would have not been as major, as when the stock market crashed there would still be enough money left for
Inflation happens when the cost of living goes well beyond the average person's income in that location. In periods leading up to the great depression costs went up dramatically, yet people still made the same amount of money. This is known as inflation and can be contributed to overspending in periods of prosperity, government deficits, etcetera. (“Chapter 16: Inflation and Recession” 4 ). This shows that this is one of the contributing factors to the Great Depression by explaining why people had no money. This is important because when the cost of living went up, companies could not afford to pay their workers more, further attributing to the rise of poverty. “For example, if the cost of oil increases, the added cost of production for a factory would increase. If a company cannot afford to absorb the added cost of production then the price of the finished product would increase. When many companies are affected by the rising costs of production then inflation would set in. Periods of so-called double-digit inflation occurred between 1917 and 1921, in 1932...” (“Chapter 16: Inflation and Recession” 4). This shows an example of how the rising costs of almost anything can directly change the costs of living. Even though people were not buying raw oil, when oil prices went up, the cost to build a factory went up, when the cost of the factory went up, the goods produced there prices went up, and the prices went up for the people. This is important because people were not compensated for these changes by their jobs, and by the time people realized this, the stock market had crashed and there was no money left to compensate. Overall, inflation had a huge role in causing the Great Depression. If it were not for inflation, it is possible the Great Depression would have not been as major, as when the stock market crashed there would still be enough money left for