Question

Explain the causes of the Great Depression.

Answer 1

The Great Depression was a result of many factors:

• Prosperity in the USA during the 1920s created a cycle of higher employment and incomes. It led to rise in consumption and demands. More investment and more employment created tendencies of speculations which led to the Great Depression of 1929 upto the mid-1930s.
• Stock market crashed in 1929. It created panic among investors and depositors who stopped investing and depositing. As a result, it created a cycle of depreciation.
• Failure of the banks. Some of the banks closed down when people withdrew all their assets, leaving them unable to invest. Some banks called back loans taken from them at the same dollar rate inspite of the falling value of dollar. It was worsened by British change in policy to value pound at the pre-war value.