Answer:
The Great Depression was a complex economic crisis that was caused by a combination of long-term and short-term factors. Here are four of them:
1. Overproduction and Underconsumption: During the 1920s, the United States experienced a period of rapid economic growth, which led to overproduction of goods and services. However, the purchasing power of consumers did not keep up with this expansion, leading to a surplus of goods and declining prices. This cycle of overproduction and underconsumption was a long-term factor that contributed to the Great Depression.
2. Stock Market Speculation: In the late 1920s, there was a significant increase in stock market speculation, fueled by easy credit and the belief that the stock market would continue to rise indefinitely. This speculation led to an artificial inflation of stock prices, which eventually resulted in a stock market crash on October 29, 1929. This event triggered the onset of the Great Depression, as investors lost confidence in the market and began selling their stocks en masse.
3. Banking Crisis: In the 1920s, banks made risky loans to investors who used the funds to buy stocks, leading to a stock market bubble. When the stock market crashed, banks lost a significant amount of money, causing many of them to fail. The collapse of the banking system led to a widespread loss of confidence in the financial system, which further worsened the economic situation.
4. Government Policies: In the early 1930s, the US government pursued policies that were not effective in addressing the economic crisis. For example, the Smoot-Hawley Tariff Act of 1930, which increased tariffs on imported goods, led to retaliatory tariffs from other countries, reducing international trade and worsening the depression. Additionally, the government did not take adequate measures to regulate the banking system or stimulate the economy through increased public spending, exacerbating the economic downturn.