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How Did The Great Depression Affect Us

423 Words2 Pages
The Great Depression incident seemed consistent with Keynes’s argument. A reduction in demand transformed economy from above its potential output to below its potential output as a result of which the recessionary gap lasted for almost more than a decade. While the Great Depression affected many countries, but it impacted US the most. The crash in aggregate demand began with a collapse in investment. The investment boom of the 1920s had left firms with an expanded stock of capital and extra inventory. As the capital stock approached its maximum level, firms did not need as much new capital, and they started to cut back on investment. The stock market crash of 1929 further reduced investment. Real gross private domestic investment faced a dip
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