H CS 20

Prosperity, Depression and the New Deal (1919-1941)

The Post-World War I period was characterized by economic, social and political turmoil. Post-war prosperity brought about changes to American popular culture. However, economic disruptions growing out the war years led to worldwide depression. The United States attempted to deal with the Great Depression through economic programs created by the federal government.

Content Statement

20. The Great Depression was caused, in part, by the federal government’s monetary policies, stock market speculation and increasing consumer debt. The role of the federal government expanded as a result of the Great Depression.

Content Elaborations

One of several factors leading to the Great Depression in the United States was the excessive amount of lending by banks. This fueled speculation and use of credit. The Federal Reserve attempted to curb these practices by constricting the money supply. The effect was to worsen economic conditions by making it harder for people to repay debts and for businesses, including banks, to continue operations.

Another factor leading to the Depression was stock market speculation. Many investors were buying on margin with the hope of making huge profits. But the collapse of the stock market led many to lose their investments and fortunes. The closing of many factories led to the rise of consumer debt as workers lost needed income.

During the 1930s, the role of the federal government was greatly expanded with the New Deal. This occurred through its efforts to help the economy recover, with programs such as the National Recovery Administration, to provide relief to the unemployed by creating jobs and to institute reforms for the protection of the elderly, farmers, investors and laborers.

Expectations for Learning

Describe how the federal government’s monetary policies, stock market speculation and increasing consumer debt led to the Great Depression.

Explain how the efforts to combat the Great Depression led to an expanded role for the federal government.