The Great Depression, which lasted from 1929 to the late 1930s, was caused by a combination of several factors. Here are three key contributors:
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Stock Market Crash of 1929: The sudden and severe decline in stock prices that began in late October 1929 eroded investor confidence and led to significant losses for individuals and banks. This crash marked the beginning of widespread economic deterioration.
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Bank Failures: A wave of bank failures occurred in the early 1930s, fueled by the collapse of the stock market and adverse economic conditions. Many banks had invested heavily in the stock market or made risky loans, leading to insolvency. The loss of savings and credit severely restricted consumer spending and investment.
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Reduction in Consumer Spending: Following the stock market crash and ensuing bank failures, consumer confidence plummeted. People began to save rather than spend, leading to a sharp decline in demand for goods and services. This reduction in spending contributed to massive layoffs and further economic contraction.
These factors, among others, created a vicious cycle of economic decline that characterized the Great Depression.