Essay Question About The Great Depression

Banks were further stressed by low returns on investments and an ailing farm sector.

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Even though many people needed food, they didn't have enough money to buy it and prices remained low.

Problems for some farmers were made worse by the extreme drought and soil erosion caused by the "Dust Bowl." In early 1930, the Smoot-Hawley Tariff was passed, against the wishes of over 1,000 economists from 46 states.

The effects the economists foretold became reality.

Businesses and farmers were not able to sell their products abroad.

At a time when the money supply was decreasing and prices were plummeting, the Federal Reserve might not have acted quickly enough to boost the money supply to achieve price stability.

These economists argue that the contraction in the money supply deepened the economic decline.Some economists argue that while the stock market crash itself may not have caused the Great Depression, it reflected the instability of the economy and the boom-bust mentality of the time. Changes in the money supply can affect the overall price level.The Federal Reserve is responsible for regulating the U. If the money supply grows too fast, prices will increase, causing inflation.Instability in the banking system disrupted saving and investment and may have contributed to the economic collapse.While the Depression hit the majority of the American population in 1930, farmers had been struggling since the early 1920s.Conversely, if the money supply grows too slowly, prices will decrease, causing deflation.When prices are stable, businesses and consumers can more easily determine the relative value of goods and services, providing an environment for economic growth.We recommend that students read the following sections to help them focus their research on either a potential cause and/or one of the responses to the Great Depression.From understanding their research on one aspect of the Great Depression, students can speculate on whether another depression could occur.Nevertheless, there are several events that economists have discussed as potential causes; here are a few examples.The 1920s were dubbed the "Roaring Twenties" due to strong levels of economic activity and a great deal of speculative activity.

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