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Causes of Great Depression

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Another one of the main causes for the Great Depression was due to the high tariffs and war debts. Many European nations owed billions of dollars to the United States. These nations that were so far in debt were impacted so strongly by World War I that they had no way of paying back their debt. The United States insisted the debt be paid off. The allies then demanded that Germany pay them through the Treaty of Versailles. This led to financial crisis when Europe couldn’t purchase goods from the United States. The United States also passed the Fordney-McCumber Act in 1922, which put high tariffs, or tax, on industrial products that were imports. This angered the other nations and they retaliated which led to a decline in world trade which was a major contributor to the Great Depression. A decline in world trade leads to a decline in Real GDP and this is bad for the economy. Overproduction in industry also played a pivotal role in the Great Depression. While factories were producing mass amounts of products, wages were not increasing at the same pace. Due to low wages and overproduction, workers could not afford to buy all of the factory output. The United States tried to sell the surplus of goods overseas, but the high tariffs and lack of money in Europe did not support this solution. An additional overproduction also occurred in the agriculture and farm industry. The average income for farm families was about a third of what average American families were making. Due to the low income on farms, the demand for farmland decreased by about 50 percent in 1930. These problems on farms had a large impact on Americans since about 30 percent of the US population still lived on farms. The “Dust Bowl” was a drought that occurred in 1930 in the Mississippi Valley. The drought was so drastic that many people couldn’t even pay their taxes or other…...

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