CONTENT STATEMENT
The Great Depression was caused, in part, by the federal government’s monetary policies, stock market speculation, and increasing consumer debt. The role of the federal government expanded as a result of the Great Depression.
CONTENT ELABORATION
One factor leading to the Great Depression in the United States was the excessive amount of lending by banks. This increased the easy access to and fueled the use of consumer credit.
The Federal Reserve attempted to curb these practices by constricting the money supply. This action worsened economic conditions by making it more difficult for people to repay debts. It was also difficult for businesses and banks to continue operations.
Another factor leading to the Depression was stock market speculation. Many investors were buying on margin with the hope of making huge profits. However, the collapse of the stock market led many to lose their investments and fortunes. The closing of many businesses led to the rise of consumer debt as workers lost needed income.
During the 1930s, the role of the federal government was greatly expanded through New Deal legislation, policies, and agencies which included:
- the Social Security Act;
- the National Recovery Administration;
- the Securities and Exchange Commission (SEC);
- the Federal Deposit Insurance Corporation (FDIC); and
- Public Works Programs (e.g., Works Progress Administration, Tennessee Valley Authority, Civilian Conservation Corps).
- The benefits of New Deal programs were unevenly distributed furthering the divide between social classes and minorities.
EXPECTATIONS FOR LEARNING
Describe how the federal government’s monetary policies, stock market speculation and increasing consumer debt led to the Great Depression.
Explain how the efforts to combat the Great Depression led to an expanded role for the federal government.