Question

How did the economic trends of the 1920s help cause the Great depression

Think about:
• what happens in industry
• what happened in agriculture
• what happened with consumers
• what happened in real estate

Answer 1

During the 1920s, there were several economic trends that contributed to the eventual onset of the Great Depression.

In industry, there was a great deal of overproduction, as businesses were producing more goods than consumers could afford to buy. This led to a surplus of goods, which in turn led to falling prices and profits.

In agriculture, there was a decline in crop prices due to overproduction and increased foreign competition. This led to financial difficulties for farmers, who were unable to sell their crops at a profit.

Consumers were also struggling financially during this time, as wages were stagnant and the cost of living was increasing. Many people were taking on debt in order to purchase goods and housing, which made them more vulnerable to financial setbacks.

In real estate, there was a speculative bubble in the housing market, as people were buying and flipping houses at an unsustainable rate. When the bubble eventually burst, it led to a collapse in the housing market and a widespread loss of wealth.

All of these economic trends helped to create the conditions that led to the Great Depression, which was a period of prolonged economic downturn that began in 1929 and lasted until the late 1930s.

Answer 2

Industry: The 1920s saw an increase in industrial production and expansion. Companies took advantage of new technologies and improved methods of production, and production increased by 40%. This increased economic activity and led to an economic boom. However, the boom was driven largely by the production of consumer goods and not by investment in capital goods such as factories, machinery and infrastructure. When the demand for consumer goods decreased, businesses had too much capacity and did not have the necessary investments to keep production going.

Agriculture: The agricultural sector during the 1920s was in a state of decline. Overproduction, falling prices, and the mechanization of agricultural production contributed to a decrease in the number of farms and farmers. This decrease in agricultural production and income contributed to the economic downturn of the 1930s.

Consumers: Consumer spending in the 1920s was driven by increased borrowing and speculation in the stock market. Consumers borrowed money to purchase items such as luxury cars and other consumer goods. This increased demand for consumer goods drove up prices and created a false sense of economic prosperity. When the stock market crashed in 1929, consumers had too much debt and could not purchase goods, leading to a decrease in demand and exacerbated the economic downturn of the 1930s.

Real Estate: The real estate market in the 1920s saw a rapid increase in prices and speculation in real estate. Banks and other lenders made it easy for people to purchase homes with little money down. This led to an oversupply of housing and an increase in foreclosures when the market crashed in 1929. The collapse of the housing market added to the economic downturn of the 1930s.

Step-by-step explanation: