Discuss The Causes And Implications Of The Great Depression

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The cause and policy proposals of the Great Depression The Great Depression in the US that lasted from 1929 to 1939 is considered as one of the most devastating economic disasters since the beginning of the 20th century. Even though almost a century has passed since the event, there are still ongoing debates over the major cause of the economic downturn. There is no controversy over the fact that the stock market crash of October 1929 signaled the beginning of the Great Depression. However, economists have proposed various explanations attempting to identify a meaningful cause of the economic downturn, rather than pointing at a particular event. The stock market crash itself does not explain anything about the Great Depression. What the economists are concerned with is the implication of an event such as the stock market crash. For example, they are interested in the change in consumers’ behaviors after the crash, the failure of fiscal and monetary policy to prevent and respond to the economic downturn, and etc. It is precisely the difference in their opinions regarding the implications of the stock market crash that prevents a consensus among them. Even though all economists might have opinions that are slightly different from others’, the explanations can generally be classified into two mainstream hypotheses. The first hypothesis is the spending hypothesis which blames the shocks to the IS (investment-savings) curve as a major contributor to the Great Depression. The

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