Question

Why did USA withdraw loans during great depression ? How did it affect world economy ?

Answer 1

a. During the years of Depression, the banking system in the US collapsed.

b. The banks could not recover loans from the domestic market, due to falling incomes of the households who could not repay back.

c. Thus,banks went bankrupt, could not recover investments, collect loans and were forced to shut.

d. This led to the withdraw of loans from the US banks.

It affected the world economy severely.

• In Europe it led to the failure of major banks.
• Collapse of major currencies
• In Latin America, agricultural and raw material prices declined.
• Production, incomes, trade declined.
• There was rise in unemployment