The Great Depression showed just how limited some old economic ideas really are. This tough time lasted from 1929 into the late 1930s and proved that some traditional beliefs didn’t work, especially those ideas about letting the market fix itself without help. Here are some key points:
Self-Correcting Market: Economists used to think that markets would bounce back on their own based on supply and demand. But during the Great Depression, unemployment shot up to almost 25%. This was a clear sign that the job market wasn't fixing itself, even without help from the government. The long length of the crisis, combined with lasting poverty, showed that this belief was wrong.
Limited Government Help: Before the Depression, many believed that the government should stay out of the economy because their help would mess things up. But when banks and businesses failed, this way of thinking was proven dangerous. As more and more businesses closed, people faced extreme hardships with no safety nets to catch them. This deepened the economic problems even more.
Consumer Confidence: Old economic models didn’t take into account how people feel during tough times. When banks collapsed, trust in the economy took a big hit. Because people were scared, they stopped spending money and investing. This strange behavior made the economy worse, showing that simple models based only on smart choices didn’t cover everything.
To tackle these tough problems, new ideas were needed. President Franklin D. Roosevelt introduced the New Deal, trying to fix the economy’s failures by:
Increasing Government Spending: The New Deal invested in public projects and created jobs to help get the economy moving again.
Regulatory Reforms: New rules and organizations, like the Securities and Exchange Commission (SEC), were created to help stabilize the financial system and rebuild trust.
Social Safety Nets: Programs like Social Security were developed to protect those who were most at risk, showing that the government needed to play a bigger role in keeping the economy stable.
Even with these efforts, the Great Depression made it clear that simple economic ideas had serious flaws. It highlighted the need for a big change toward a system where the government gets more involved to help the economy run better.
The Great Depression showed just how limited some old economic ideas really are. This tough time lasted from 1929 into the late 1930s and proved that some traditional beliefs didn’t work, especially those ideas about letting the market fix itself without help. Here are some key points:
Self-Correcting Market: Economists used to think that markets would bounce back on their own based on supply and demand. But during the Great Depression, unemployment shot up to almost 25%. This was a clear sign that the job market wasn't fixing itself, even without help from the government. The long length of the crisis, combined with lasting poverty, showed that this belief was wrong.
Limited Government Help: Before the Depression, many believed that the government should stay out of the economy because their help would mess things up. But when banks and businesses failed, this way of thinking was proven dangerous. As more and more businesses closed, people faced extreme hardships with no safety nets to catch them. This deepened the economic problems even more.
Consumer Confidence: Old economic models didn’t take into account how people feel during tough times. When banks collapsed, trust in the economy took a big hit. Because people were scared, they stopped spending money and investing. This strange behavior made the economy worse, showing that simple models based only on smart choices didn’t cover everything.
To tackle these tough problems, new ideas were needed. President Franklin D. Roosevelt introduced the New Deal, trying to fix the economy’s failures by:
Increasing Government Spending: The New Deal invested in public projects and created jobs to help get the economy moving again.
Regulatory Reforms: New rules and organizations, like the Securities and Exchange Commission (SEC), were created to help stabilize the financial system and rebuild trust.
Social Safety Nets: Programs like Social Security were developed to protect those who were most at risk, showing that the government needed to play a bigger role in keeping the economy stable.
Even with these efforts, the Great Depression made it clear that simple economic ideas had serious flaws. It highlighted the need for a big change toward a system where the government gets more involved to help the economy run better.