What Caused The Great Depression? By Timothy G.

What is an economic depression? A depression occurs when the demand for a good is higher than the supply. This leads to an influx of unsold goods, which in turn leads workers to get laid off, fewer raw materials to be bought, and service providers have fewer clients and income falls. The fluctuation between supply and demand is normal and called a business cycle with two types of goods: durable goods and capital goods. Durable goods are consumer goods that last a long time. The demand for these products tends to increase when customers are feeling prosperous and falls when customers aren’t feeling as prosperous. Capital goods are goods that produce other goods or capital. These can be things such as machinery, buildings, or commercial vehicles, all of which work in some way to produce other goods. During the business cycle, the demand will reverse, increasing the number of

More Americans bought homes, home furnishings, appliances, and automobiles. Increased spending on goods led to a rise in government spending on local infrastructure so that roads, sidewalks, and water and sewage services were all being funded by the government. In the journal article “What Caused the Great Depression?” by Jean Caldwell and Timothy G. O’Driscoll, the authors highlight that, “Spending by consumers, business firms, and state and local governments created plentiful, high-paying jobs.” As is said, what goes up, must come down, and that is exactly what happened in the business cycle. During the late 1920s, demand was decreasing, and by the summer of 1929, total spending in the American economy was also decreasing. Businesses cut production, the stock market crashed, and there was a loss of wealth. Decreased spending was not a large problem in the beginning, but when demand did not increase to where it once was businesses had to lay off employees, and many places were bankrupted. So, how was America able to recover from the