The Great Depression and the US Economy - Free Essay Example

Introduction The Great Depression had an impact on the entire world, especially the US, from 1929 to the early 1940s. One of the most influential causes of the US economy crash was the Great Depression, which was created from people making big purchases with installments, overproduction, and marginal buying. 1st Body Paragraph In the 1920s, many people went on a shopping frenzy and began to make big purchases on things like furniture and radios, but they didnt have the money at the time so they purchased it with installments. As can be seen in Document 1, 60% of all automobiles and furniture were bought with installments. When something is bought with installments the bank had to spot the rest, which means that the bank had less money until the customer paid the rest of the price. This all contributed to the banks shutting down when people wanted to withdraw their money and couldnt, which led to the economy crash. 2nd Body Paragraph Farmers and factories, in the 1920s, were producing too many goods and people couldnt afford to purchase all of them. As a direct result of this, prices dropped and less workers were needed. As people were laid off, more people had no income which meant they couldnt buy goods which meant goods werent being bought etc. It was the beginning of a vicious cycle that led to the Great Depression. Document 3. Document 2, shows that the minimum income necessary to meet the basic needs of the average American family was $2,000. However, in 1929, less than 40% of the US population had an income of at least $2,000. This is the direct result of overproduction because without a job, many families had little income. On top of having produced too many goods and not being able to sell them in the US, they didnt have much luck being able to sell it to countries either. The reason behind this is because Congress became greedy and decided to step up tariff rates higher and higher despite warnings from American economists. Document 5. 3rd Body Paragraph In the 1920s many people began to purchase stock, however, they didnt always have enough money to pay for the stock at the moment. So they purchased it on margin, this meant that the investor only had to pay a fraction of the price and the additional money would be supplied by the broker. Unfortunately, the investor usually did not have enough money to pay the remainder, especially if there was a decrease in security values, and then the downward spiral was set into motion and there was no apparent way to stop it. Document 4. Conclusion The Great Depression heavily impacted the US economy in such a way that caused it to crash, this can be blamed on making big purchases with installments, overproduction, and marginal buying.