The Great Depression and the Great Recession - 2123 Words

Abstract Economic depression is a state of the economy resulting from an extended period of negative economic activity as measured by GDP .The great economic depression of the US from 1929-1939 was one of the worst economic depressions in the world economy. The GDP per capita of the United States fell by a third (Federico 2005). A lot of economic activities went down and so many people suffered. Even though the depression affect the rest of the world, it has been called the great depression of the US because it’s believed that the US suffered more than any other nation and the causes are also attributed to have been started in America. Many things have been attributed to have caused the great depression among them are bank failure,†¦show more content†¦This made American banks to stop lending as a result many European countries evaded to pay their loans. Hence most of the banks went bankrupt leading to over 9000 banks closing down (Anari 2005). Most of the bank deposits were not secured therefore when the banks closed down many people lost their money. Some depositor withdrew their money from banks due to panic hence leading to such banks running out of business. The remaining banks were not willing to lend anymore because they were not sure of the economic situation hence they did not provide more loans this lead to fall in consumption which consequently lead to fall in production and increase in unemployment rate. Too many poor people. This looks like a ridiculous reason, but it contributed to the great depression. During the 1920s the American economy was booming, but there was income disparity and the gap between the haves and the have not was big. Most of the wealth generated during the boom session belonged only to a few Americans. According to Cutler (2007) 40 % of the population was living at or below the poverty level in 1929. Hence this people could not purchase goods and service also they could not repay the loans they had borrowed. This lead to reduction in consumption hence many companies had reduced market therefore they counter reacted by reductionShow MoreRelatedGreat Recession And The Great Depression906 Words   |  4 PagesGREAT ECONOMIC TIMES IN AMERICA The Great Recession and the Great Depression are the fallout of the exact same economic problems and are only different in a few respects. Each period is marked by a massive run ups in asset prices followed by a crash in the stock market and sent both debt and equity markets down. These periods are said to be the worse economic downturn in the country’s history. During the great depression, as banks failed and threatened to shut down the financial system altogetherRead MoreThe Great Depression And Great Recession Essay1700 Words   |  7 PagesThe Great Depression and Great Recession were two unique events that had monumental impact on the economy. 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