Question

1. what did franklin roosevelt do to fix he economy after the crash?

2. what were the causes that led to people losing confidence in the market?

Answer 1

1.

Depressions are common in the US economy. Before the great depression, there were four consecutive depressions that followed which were caused by government policies that created easy money and credit. Businessmen used this money to buy bad investments which began to collapse and depression ushered. In these previous depressions, Fed had raised the rate of interest in order to weed out poorly managed firms leaving only strong firms to remain.

Both Herbert Hoover and Franklin Roosevelt were presidents during the great depression. They had hiked government spending without increasing taxes and creating huge budget deficits. They have been criticised on grounds of prolonging the depression phase. Roosevelt called this big spending the New Deal which created new government agencies. These new agencies caused a lot of cost from tax to run. This new deal consisted of various programs to give relief to people with Depression. These programs did improve the economy but could not prevent another Depression from taking place.

2.

During 1929, The U.S stock market underwent a rapid expansion which is called a period of wild speculation. By that time, production had declined and unemployment increases, leaving stocks in great excess of their real value. Among other causes, the factors were low wages, weak agriculture, excess of large bank loans which cannot be liquefied. All these conditions led to people losing confidence in the market.