Did Federal Reserve cause the Great Depression? Business Term Paper (Term Paper Sample)
tHIS TERM PAPER ANALYSES THE POSSIBILITY THAT THE GREAT DEPRESSION COULD HAVE BEEN CAUSED BY THE FEDERAL RESERVE.source..
Causal Role of the Federal Reserve to the Great Depression
Did the Federal Reserve cause the Great Depression?
The Great Depression was an unprecedented worldwide economic downturn that is recorded as the most severe one to ever happen in the industrialized world. Despite starting and greatly affecting the United States of America, the impact of the Depression was felt in almost all countries around the world CITATION Ste174 \l 1033 (Longrigg, 2017). It started in 1929 lasting through to 1939, making it the longest economic depression ever. It was preceded by the October 1929 stock market crash which caused panic among Americans and investors. the crash led to detrimental losses of property and capital as well as wiping out millions of wall street investors. As a result, the following years were characterized by low consumer spending, decline in investment, reduced industrial production levels and consequently skyrocketing unemployment rates. Companies were forced to retrench workers and reduce their production costs to remain operational CITATION Llo13 \l 1033 (Thomas, 2013). The Great Depression can be attributed to several factors. Among them is the reckless speculations of investors in the stock exchange in the previous economic boom that led to dangerously exorbitant stock prices, a bank crisis due to consumers panic which led to many people recalling their deposits from the banks, and a prolonged drought. However, by keenly analyzing the turn of events over the 10 years, the federal reserve is primarily the cause of the severity and length of the depression.
Reasons and Signs of an Economic Depression
Before dwelling on the finer details of the great depression it is fundamental to understand what a depression is characterized of. According to Crayton and Porterfield (2016), an economic depression a state of financial turbulence as a result of a prolonged duration of negative activity based on the economy’s Gross Domestic Product (GDP). It is far much worse than a recession and generally lasts for several years. In the case of the Great Depression, it lasted for ten years with wages declining by more than 42% and the unemployment rates reaching 25% CITATION Llo13 \l 1033 (Thomas, 2013).
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