During the Great Economic Depression, policymakers employed a multifaceted approach, utilizing various policy instruments to mitigate the widespread economic turmoil. One crucial measure enacted was fiscal policy, which involved government intervention through increased spending and tax adjustments aimed at stimulating demand and bolstering economic activity. Governments injected funds into public works projects, such as infrastructure development and job creation initiatives, to combat unemployment and stimulate consumer spending. Additionally, monetary policy played a pivotal role, with central banks implementing strategies such as lowering interest rates and expanding the money supply to encourage borrowing, investment, and overall economic growth. Regulatory measures were also implemented to stabilize financial markets and restore confidence, including the establishment of deposit insurance to safeguard bank deposits and prevent bank runs. Moreover, international cooperation was fostered through initiatives like trade agreements and currency stabilization efforts to alleviate the global repercussions of the Depression. Through these policy instruments, policymakers endeavored to contain the Great Economic Depression, aiming to restore stability and lay the groundwork for economic recovery.
Tags: History of the world:
Decoding the Question:
- In Introduction, try to start by defining the Great Economic Depression with some background.
- In Body, discuss the anti-depression measures deployed.
- Conclude with commenting on the impacts of anti-depression measures.
Answer:
The term “Great Depression” refers to the greatest and longest economic recession in modern world history. The Great Depression ran between 1929 and 1941, which was the same year that the United States entered World War II 1941. This period was accentuated by a number of economic contractions, including the stock market crash of 1929 and banking panics that occurred in 1930 and 1931.
With the election of F.D Roosevelt as the U.S president in March 1933. The Government started initiating a number of measures to counter the prevailing depression. This policy instrument adopted by the U.S government was known as ‘new deal’. Two ‘new deals’ came into force during 1933-1934 & 1935-1938. ‘New deals’ constructed by Relief, Recovery & Reforms.
Policy Instruments Deployed to Contain the Great Economic Depression:
- Emergency Banking Relief Act enacted by Parliament and powered by the President to regulate banking power & foreign exchange to pave the way for the restoration of faith in the banking sector.
- Federal Deposit Insurance was enacted to insure the banking deposits of the U.S citizens, so that public faith could be restored in the Bank.
- A Federal Relief Emergency was announced through which 500 million dollars were distributed to state & local governments to face the economic crisis.
- The Civilian Conservation Corps was to provide employment to citizens. So that people could have some amount of money to buy food.
- Agricultural Adjustment Administration was to ensure availability of markets for peasants. This is the step to revive the U.S Agriculture.
- Tennessee Valley Authority was to undertake developmental projects in the Tennessee Valley region, as it was severely affected by the depression.
- The National Industrial Recovery Act was enacted to stimulate competition and increase production, the government also emphasized to pursue good neighbor policy to improve relations with neighbors to pave the way to increase international trade.
This expanding industrial production, as well as widespread conscription beginning in 1942, reduced the unemployment rate to below its pre-Depression level. The Great Depression had ended at last, and the United States turned its attention to the global conflict of World War II.
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