revise on my econ paper

Yifeng Wang

Econ 126

Professor Baden

Oct 31, 2018

The United States has had its recessions in its many years as a country, but the great depression marked its major financial devastation. The great depression is believed to have lasted from 1929 to 1941. However, other individuals argue that the great depression came to an end after the Second World War II. Before this depression, the United States boasted the largest economy in the world.

The primary Cause of Great depression

As a great depression that brought the downturn of the economy in the western industrialized world, it is difficult to pin one fault for the great depression. Some factors have contributed to the depression. Several arguments and theories that have been brought forward as to why the economy collapsed, but the obvious one and most pointed at is the stock market crash that took place in October 1929. This Stock Market crash saw many investors panicking, and they started selling their shares in a very extraordinary volume. In two months, the stakeholders had lost over 40 billion dollars increasing the downfall of the United States economy. Besides the fact that the stock market was able to gain its losses at the end of 1930, it was not adequate, and America entered the great depression (Eichengreen, 2016).

The economic recovery of Great depression in the United States

The recovery of great depression in the United States can be traced back in the year 1933. However, they were not able to return to their 1929 GNP for several decades and still had an unemployment rate of close to 15%. Other factors that are associated with the recovery of great depression in the United States is the end of Second World War II that saw the reduction of taxes, spending, and regulations during this period. Further, at the end of this war, the late unemployment reduced significantly leading to an increased or rise of the GDP (Cole& Ohanian, 1999).

Difference between the Great Depression of 1929 and Great Recession of 2008

These are the two most significant economic upheavals experienced in the United States. However, the great recession of 2008 differs from the great depression as seen in its GNP. Depression refers to any economic decline where the real GDP drops by more than 10% whereas the recession is an economic decline which is less severe. For example, the Great Depression saw the decrease in the GDP by 18.2% unlike the recession of 2008. Also, policy response between the two was quite different. During the great depression, monetary policy was tightened by Federal Reserve leading many banks to fail and credit to tighten. On the other hand, during the 2008 recession,Federal Reserve loosened the monetary policy and offered the liquidity to the banks (Cole & Ohanian, 1999).

References

Eichengreen, B. O. E. A. P. S. (2016). Hall of mirrors - the great depression, the great recession, and the uses-a.

Cole, H. L., & Ohanian, L. (1999). The Great Depression in the United States from a neoclassical perspective.