Question

Write down the main causes of the Great Depression.

Hint:

The Great Depression was a multifaceted crisis that involved financial mismanagement, economic imbalances, and external factors such as natural disasters. Understanding these causes helps us recognize the vulnerabilities in global and national economies.

Answer 1

The Great Depression was caused by several interconnected factors that triggered a global economic downturn. The main causes of the Great Depression were: 1. Stock Market Crash of 1929:
The most significant event that triggered the Great Depression was the stock market crash in the United States in October 1929. This crash led to the loss of wealth, a decline in consumer spending, and a collapse in international trade. The fear and panic following the crash spread across the globe, leading to economic downturns in other countries, including India.
2. Bank Failures:
Following the stock market crash, numerous banks failed due to the widespread loss of savings and investments. The failure of these banks led to a credit crisis, making it difficult for businesses and individuals to borrow money. The resulting liquidity shortage contributed to the deepening of the depression.
3. Reduction in International Trade:
The collapse of the global economy led to a reduction in international trade. Countries, including the United States, imposed tariffs on foreign goods to protect their domestic industries, which led to retaliatory tariffs. This trade war worsened the economic conditions worldwide, as it became more difficult for countries to export their products.
4. Overproduction and Underconsumption:
During the 1920s, many industries in advanced economies overproduced goods, anticipating continued demand. However, consumer demand did not keep pace, leading to a surplus of unsold goods. This resulted in a decrease in prices, factory closures, and widespread layoffs.
5. Drought and Agricultural Failures:
In addition to the financial causes, the Great Depression was exacerbated by agricultural failures, including severe droughts in some regions. Poor harvests led to food shortages, rising prices, and increased poverty among agricultural workers.