What factors combined caused the Great Depression?

Answer

The Great Depression happened because people thought the banks were going under, and took their money out of them, in large numbers. That caused the banking system to collapse. Short signed government economic policies were one of the factors that led to the Great Depression. The economy was not stable. The Stock Market Crash of 1929 contributed to the Great Depression.

Also, there was underconsumption, meaning that manufacturers were making more than people were buying. Therefore, factories began making less products. They fired workers because less of them were needed to make the items. Unemployment rose. People had to spend their money wisely, and most of them saved up money. People weren't buying as much of the items that the manufacturers were making, underconsumption. The Great Depression is a cycle that is difficult to get out of.

As the United States was going through its Great Depression. it asked Germany to repay its loans from WWI. Germany could not and fell into depression as well. Soon, the American depression turned into an international problem.

The reason why this happened was because of bad motenary policy. The Federal Reserve did not deal with deflation correctly. Then things were made worse because of high taxes, trade tariffs and interference of free enterprise.

In America, as the Depression progressed, many "deals" were done the basis of trade and barter. When dollars are spent, there is an economic factor called the multiplier. This is a theoretical increase in numbers of dollars spent that drives an economy up. It was lacking and so while peolple used exchange and barter to get the goods and services they needed, it only served that individual and his family and did not increase the economy as a whole.

Added answer:

Look up Milton Freedman, "Free to Choose". Well documented and Nobel Peace Prize winner in economics.

First answer by Lkysmy. Last edit by Rmwing215. Contributor trust: 1 [recommend contributor]. Question popularity: 136 [recommend question]