Questions to Answer:
1. How did the Great Depression start?
The Great Depression started in the United States when the stock market crashed on October 29th, 1929. From there, it spread quickly to countries all over the world. It was the longest and most widespread depression of the 20th century. Fall in stock prices was what lead to this stock market crash.
2. How did the current recession start?
High liquidity and low interest rates on mortgage loans created a high demand for housing properties. The U.S sub-prime mortgage crisis indicated that there was going to be a crisis. Not so creditworthy people received loans from banks and they began to buy homes with this money. This created a rise in residential property prices. With this increase in prices, people could no longer pay for their loans. The banks ended up selling the houses for money leading to further sub-prime customers.
3. How did the government take part following the event? Were/ are they successful attempts?
During the Great Depression, the government spent millions of dollars on various relief programs. The government also handed out food vouchers, created a form of employment insurance and also tried to create jobs so that the unemployment rates would go down. I think that the government in the 1930s did what they could with the little money that they had.
In the current recession, the government is spending billions of dollars trying to help the citizens. They are reducing the tax burden for Canadians, helping the unemployed, supporting industries and communities and also improving access to financing and strengthening Canada's financial system. The government is helping the unemployed by building infrastructure to create jobs and also innovating the economy through science, technology and research so that more jobs will be created. In my opinion, i think that these attempts are pretty successful because they all affect the country as a whole.
4. What factors are present now that were not present during the Great Depression?
In today’s society, there are many more factors that could lead to a recession or even a depression. Credit cards are a common form of payment and they can easily be misused by some. Credit cards usually have a high interest rate and individuals who fail to pay their bills on time will be penalized. This causes them to have bad credit. Now that they have bad credit, banks will know that loaning money to these individuals may not be a great idea. The internet is also a great resource that people can use today. They can monitor their financial assets and also do research regarding stocks.
5. How did these two affect United States’ GDP?
In the Great Depression, unemployment was extremely high and people could no longer afford luxuries because they were already striving to buy necessities. Since not many people could afford goods, the demand went down causing more people to get unemployed. This caused an even greater decline in the United States’ GDP.
In the current recession, demand for goods also went down which also caused the United States’ GDP to go down.
6. Reflection: in your own words, tell me which one has made more of an impact on the world.
I certainly feel as though the Great Depression has left a bigger impact on the world compared to the current recession. Unemployment rates were at its highest during the 1930s and we are definitely nowhere near those rates at the moment. The Great Depression left many people broken, jobless and striving to provide food and shelter for themselves. Although the current recession is also creating a lot of unemployment among citizens, the government is currently spending billions of dollars on programs to create jobs. During the Great Depression, the governments had little to no source of revenue to create new jobs so the Depression lasted for at least 10 years.
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