In our lecture, we learned that the causes of the Great Depression are mainly due stock market crash and bank panic. During October 1929, the market stock price started to fall, which decreased the wealth of investors. Also, the fall in price level increased the real value of the debt obligation of people who had mortgage. People also worried about their unemployment, so they would then decrease their consumption. For bank panic, in October 1930, a series of banks failed caused people to withdraw from banks. This act decreased money supply in the market and caused interest rate to increase. GPD then would decrease as well.
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