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Causes of GD
List of causes of The Great Depression
Term | Definition |
---|---|
Unequal Distribution of Wealth and Income | 1. Income distribution was unequal 2. Richest 1% of the population had all the wealth 3. US economy was depended on luxury spending and high investment of the rich. 4. Market crash = big spending and investment collapse |
Unequal Distribution of Corporate Power | 1. Huge corporations like General Electric made competition nonexistent. 2. 200 of the biggest companies controlled 50% of the big business wealth in the USA. 3. If a few companies couldn't survive, the whole economy would suffer. |
Bad Banking Structure | 1920s, 4-5 banks were opening per day with FEW federal rules. |
Bad Banking Structure RESULTS | Banks unable to pay debts that were owed AND between 1923 and 1929, banks closed at a rate of 2 per day. |
Foreign Balance of Payments | 1. After WWI, US was owned money by other countries. 2. US insisted payments be made in gold. 3. Gold was limited because the US controlled most of it. Countries could pay in goods and services. 4. Protectionism and high tariffs |
Protectionism (Foreign Balance of Payments) | Protecting home industries from foreign industries by taxing imports. |
High Tariffs (Foreign balance of Payments) | Kept foreign goods out the the US. |
Limited Economic Intelligence | Economists and political leaders still believed in a self-regulating economy. President Hoover refused to go off of the gold standard. |
Decrease in Money Supply | The decline in the money supply led to a rise in unemployment. If the Federal Reserve had increased the money supply, the fall in the economic activity could have been less severe. |
International Factors | The Depression was a global event. All countries were on the same money system. If something happened in one economy, all economies would suffer. |