Questions to Answer:
1. How did the Great Depression start?
The "Great Depression" was the worst economic depression in US history. It led to a decade known as the "Dirty Thirties". One of the most major factors in this economic downfall was the way banks were run. During the "Roaring 20s", as prosperity was blooming, the US's banks were lending out money at a fanatical rate - often to people who had no proof that they could repay their debts. Later on in the decade, banks further worsened the situation when they decided to (for concern over their survival) stop issuing loans out to people due to the 1929 stock market crash of over $40 billion dollars. In an act of trying to save American companies, the US government created the Smoot-Hawley Tariff in 1930. This new tariff only further worsened the economy as it made import prices incredibly high for other countries, who in turn also raised their tariffs.
2. How did the current recession start?
The current recession, although not at the same level as the depression of the 1930's, is one that was caused by similar circumstances. For the most part, the current recession was started because US banks were once again lending out money to people who did not show signs of reassured repayment - for example, people with bad credit. This problem was worsened by the USA's real estate market crash because this particular market held a lot of money loaned from the banks themselves. When the market crashed and house prices plummeted, people who had sub-prime loans were no longer able to repay their debts.
3. How did the government take part following the event? Were/ are they successful attempts?
During the 1930's depression, the US government tried to aid in the recovery of their situation by introducing work camps and new projects to create new jobs for millions of men. They also helped the most famous depression by opening soup kitchens to feed those in need. In this current recession, the government has offered help in the form of government bail outs to such major companies as G.M and Chrysler. Yes, I believe that these were successful attempts as by creating jobs and making sure major corporations do not fall, it allows millions to keep earning income, which in return gets put back into the economy.
4. What factors are present now that were not present during the Great Depression?
One factor that is present now but was not present during the Great Depression was high interest rate payments due to credit cards and the openness of information over the internet. Today, credit cards are made widely available and are often promoted for usage. Although this may not pose as an immediate problem for all, it does, however, pose as one for those who cannot control their spending and do not keep the high interest rates in mind. For these people, the inability to repay banks their debts is worsened.
5. How did these two affect United States’ GDP?
These affected the United States' GDP because during times of economic hardship, employment is severely cut down. As a result of millions losing jobs, the rate of unemployment soars as the total amount of goods and services is cut down along with it. Another factor that decreases GDP during these times due to unemployment is that because millions are without jobs, the money spent on consumer goods is further cut down as people have to resort to spending their savings.
6. Reflection: in your own words, tell me which one has made more of an impact on the world.
In my opinion, I believe that the "Great Depression" had a much harder impact on the world than the current recession. Although the current recession has seen many challenges, the depression of 1930 has taught and made us open our eyes much more. It has taught us things such as to whom we should make eligible for loans and the consequences of inadequate screening. It has also taught us first what calibre of government intervention is required to save a failing economy.
