Page 45 - Reading Success B7

The Great Depression was the worst economic slump ever in U.S. history. In fact, it
not only affected the United States but the financial depression spread virtually
throughout the entire industrialized world. The depression began in late 1929, and lasted
for about a decade. Many factors played a role in bringing about the depression.
However, the main cause for the Great Depression was the combination of greatly
unequal distribution of wealth throughout the 1920's, and the extensive stock market
speculation that took place during the latter part that decade.
The unequal distribution of wealth in the 1920's existed on many levels. Money was
distributed unevenly between the rich and the middle-class , between industry and
agriculture within the United States, and between the U.S. and Europe. As a result, this
imbalance of wealth created an unstable economy. Also, the extreme speculation in the
late 1920's kept the stock market unnaturally high, and eventually lead to large market
crashes not only in the United States but to other major markets worldwide. These market
crashes, combined with the uneven balance of wealth, caused the American economy to
crumble. Because of the speculation in the American stock market and the growing gap
between the rich and the poor, the following crashes in the stock market eventually
triggered the fall of the U.S. economy. Due to the widespread financial uncertainty of
the time, the American economy of the 1920's was one that was very dependent upon
consumer confidence. Naturally, the worsening financial conditions lowered the
consumer’s confidence in the economy. The rich stopped spending on luxury items, and
slowed investments. The middle-class and the poor stopped buying things with
installment credit for fear of losing their jobs, and not being able to pay the interest. As a
result, jobs were lost and things just kept getting worse. Radios and cars bought with
credit had to be returned. All of the sudden, warehouses were piling up with inventory
because no one could afford to buy anything or didn’t want to buy anything at all. The
thriving industries that had been connected with the automobile and radio industries
started falling apart. Without a car, people did not need fuel or tires, and without a radio,
people had less need for electricity.
On the international scene, the rich had practically stopped lending money to foreign
countries. In response to protect the nation's businesses, the U.S. imposed higher trade
barriers. This, in turn, caused foreigners to stop buying American products. This only
made things worse. More jobs were lost, more stores were closed, more banks went
under, and more factories closed. By 1930, unemployment grew to five million, and up to
thirteen million in 1932. The country spiraled quickly into catastrophe. Thus, the Great
Depression had begun.

Main Idea

What is the main idea of this story?

a. how the Great Depression was ended

b. what life was like during the Great Depression
c. the causes of the Great Depression

d. the American automobile industry during the Great Depression

48_Reading Success B 7