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The short answer is that economists don't agree on a single cause.
The effects the economists foretold became reality.
Businesses and farmers were not able to sell their products abroad.
Between 19, employment fell about 25 percent and total production of goods and services dropped by 30 percent.
What conditions or events caused this steep decline in economic activity?
Some economists argue that while the stock market crash itself may not have caused the Great Depression, it reflected the instability of the economy and the boom-bust mentality of the time. Changes in the money supply can affect the overall price level.
The Federal Reserve is responsible for regulating the U. If the money supply grows too fast, prices will increase, causing inflation.Accompanied by increased unemployment and the inability of farmers to sell their crops, the Great Depression worsened.The Great Depression stalled economic activity and left many people out of work.Even though many people needed food, they didn't have enough money to buy it and prices remained low.Problems for some farmers were made worse by the extreme drought and soil erosion caused by the "Dust Bowl." In early 1930, the Smoot-Hawley Tariff was passed, against the wishes of over 1,000 economists from 46 states.The tariff imposed a 100 percent tax on raw materials entering the United States.As a result, most other countries passed similar tariffs, severely slowing worldwide trade.Instability in the banking system disrupted saving and investment and may have contributed to the economic collapse.While the Depression hit the majority of the American population in 1930, farmers had been struggling since the early 1920s.Nevertheless, there are several events that economists have discussed as potential causes; here are a few examples.The 1920s were dubbed the "Roaring Twenties" due to strong levels of economic activity and a great deal of speculative activity.