History quiz

What key factors caused the Great Depression?

Stock Market Crash of 1929

The immediate trigger of the Great Depression was the stock market crash on October 29, 1929. This event, known as Black Tuesday, saw the value of stocks on the New York Stock Exchange plummet by 12%, wiping out millions of dollars in wealth.

Bank Runs

The stock market crash led to widespread panic and a loss of confidence in the financial system. This resulted in a wave of bank runs, as depositors rushed to withdraw their money from banks. The ensuing liquidity crisis caused many banks to fail, which further eroded public confidence and reduced the supply of money available for loans.

Overproduction and Industrial Stagnation

The rapid expansion of the American economy during the 1920s had led to a situation of overproduction, with supply exceeding demand in many industries. This contributed to a decline in factory output and increased unemployment.

High Interest Rates

In an effort to curb speculation and control the money supply, the Federal Reserve raised interest rates in the late 1920s. While this may have been a prudent move in theory, it had the unintended consequence of making it harder for businesses and individuals to borrow money.

Smoot-Hawley Tariff Act

In an attempt to protect American industry, the United States passed the Smoot-Hawley Tariff Act in 1930. This act raised tariffs on imported goods to record levels, sparking a tit-for-tat increase in tariffs by other countries. The resulting trade war further reduced international trade and worsened the global economic crisis.

Dust Bowl

In the 1930s, a severe drought struck the southern and central United States, causing widespread crop failures. This environmental disaster, known as the Dust Bowl, also contributed to the economic hardship of the time.