During the 1920’s America was experiencing great economic growth. As WWI was ending Americans were out of energy. For almost 100 years they had been facing the problems of sectionalism, civil war, reconstruction, imperialism, and WWI. By the end they were ready to just sit back and party. Demand sky-rocketed and brought great economic growth. Americans failed to see the great problem looming overhead though. The Great Depression was caused by a combination of factors- a natural slowdown of the business cycle, weaknesses of the 1290’s economy magnified the slowdown, the republican response failed to help, a great environmental disaster, and the collapse of the world economy all contributed to the cause of the Great Depression.
In 1929 the American economy began to slow down. It is a natural part of the business cycle in which all industrial nations experience. There are times when demand is high and the economy grows, but then once people have the things they want demand goes back down and the economy slows down. Usually the economy goes up again after a few years, but in 1929 the slowdown exposed many weaknesses of the 1920’s economy.
The 1920’s economy had a good number of problems which magnified the slowdown of the economy in 1929. First was that there was very little economic diversity as a few large businesses dominated in the economy and when they started going down they dragged everyone along with them. Second was that there was a large stratification of wealth in which 1% of the population owned about 59% of the wealth. Businesses did not increase wages during their great prosperity in the 1920’s so when the economy began slowing down millions of average workers did have a sufficient amount of ...
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...ep the economy together wasn’t working very well. France and Britain were harsh in deciding the reparations Germany would have to pay, way more than Germany could possibly pay right after a huge war. So the U.S. created the Dawes plan in which businesses would loan money to Germany so they could pay Britain and France so that those two could pay the U.S. back. Germany was unable to keep up with payments though and their economy collapsed which led to Britain and France’s economies falling apart. This broke down international trade even further and cut the U.S. short of a lot of money. That is how the collapse of the world economy was a factor in causing the Great Depression.
By themselves these independent factors would not have been enough to cause the Great Depression. As they compounded though, it turned a natural recession of the economy into a Great Depression.
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