The Great Depression
                     
INTRODUCTION
Great Depression, worldwide economic 
downturn that began in 1929 and lasted until 
about 1939. It was the longest and most 
severe depression ever experienced by the 
industrialized Western world, sparking 
fundamental changes in economic 
institutions, macroeconomic policy, and 
economic theory.
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IMPACTS
Although it originated in the United States, the 
Great Depression caused drastic declines in 
output, severe unemployment, and acute 
deflation in almost every country of the world. 
Its social and cultural effects were no less 
staggering, especially in the United States, where 
the Great Depression represented the harshest 
adversity faced by Americans since the Civil War.
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Economic history
The Depression was particularly long and severe 
in the United States and Europe; it was milder in 
Japan and much of Latin America. Perhaps not 
surprisingly, the worst depression ever 
experienced by the world economy stemmed from 
a multitude of causes.
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Timing
The Great Depression began in the United States 
as an ordinary recession in the summer of 1929. 
The downturn became markedly worse, however, 
in late 1929 and continued until early 1933.
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Severity
Between the peak and the trough of the 
downturn, industrial production in the United 
States declined 47 percent and real gross 
domestic product (GDP) fell 30 percent. The 
wholesale price index declined 33 percent (such 
declines in the price level are referred to as 
deflation). 
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Severity in the United States
The severity of the Great Depression in the 
United States becomes especially clear when it is 
compared with America’s next worst recession, 
the Great Recession of 2007–09, during which the 
country’s real GDP declined just 4.3 percent and 
the unemployment rate peaked at less than 10 
percent.
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Severity in the United States
The severity of the Great Depression in the 
United States becomes especially clear when it is 
compared with America’s next worst recession, 
the Great Recession of 2007–09, during which the 
country’s real GDP declined just 4.3 percent and 
the unemployment rate peaked at less than 10 
percent.
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Causes of the decline
The fundamental cause of the Great Depression 
in the United States was a decline in spending 
(sometimes referred to as aggregate demand), 
which led to a decline in production as 
manufacturers and merchandisers noticed an 
unintended rise in inventories. 
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Stock market crash
The initial decline in U.S. output in the summer of 
1929 is widely believed to have stemmed from 
tight U.S. monetary policy aimed at limiting stock 
market speculation.
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Economic impact
The most devastating impact of the Great 
Depression was human suffering. In a short 
period of time, world output and standards of 
living dropped precipitously.
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