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Great Depression. worldwide economic downturn that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world. Although the Depression originated in the United States, it resulted in drastic declines in output, severe unemployment, and acute deflation in almost ...
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One reason to study the Great Depression is that it was by far the worst economic catastrophe of the 20th century and, perhaps, the worst in our nation’s history. Between 1929 and 1933, the quantity of goods and services produced in the United States fell by one-third, the unemployment rate soared to. 25 percent of the labor force, the stock ...
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KEY: Businesses hire people if it’s profitable. Must reasonably expect to sell what you produce. Unemployment depends on output. When less output is produced, fewer people have jobs. Output per year = gross domestic product, GDP. GDP depends on Aggregate Demand (AD) AD = C + I + G + (EX – IM) AD = C + I + G + (EX – IM)
In this chapter I review economic literature on the Great Depression to explain the course of aggregate real activity and inflation in the United States from 1929 through the beginning of the 1937-38 recession. There are many excellent short overviews of the Great Depression in the United States (e.g. Romer 1993, Temin 2000).
the Great Contraction, and that these shocks were transmitted around the world pri-marily through the workings of the gold standard, is quite compelling. Of course, the conclusion that monetary shocks were an important source of the Depression raises a central question in macroeconomics, which is why nominal shocks should have real effects.
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- Ben S. Bernanke
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- 1995
upon by the economic historian of the future it will be seen to mark one of the major turning points” (Keynes, 1931). Keynes was right; Table 1 shows some of the dimensions. What are the key questions that we should ask about the Great Depression? Why did the crisis begin in 1929 is an obvious start but more important questions are why it was ...
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First, the financial-propagation view of the Depression implies that a money-supply shock of a given magnitude will have a larger effect if it occurs at a time of high leverage, or in an economy with a poorly diversified, geographi-cally fragmented banking system like that of the United States.
