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During economic depression, businesses stop expanding, employment falls, unemployment increases and housing prices fall. People who have mortgages do not have money to repay their loans and as a result they lose their homes to foreclosures.
After the Great Depression in 1929, the US has been fortunate not to face an economic depression. The Great Depression lasted for 10 years and during that period the GDP growth rates were massive and have not been seen since.
- In 1930, the GDP growth rate was 8.6 percent
- In 1931, it was 6.4 percent
- In 1932, it was 13 percent
- In 1933, the GDP growth rate was 1.3 percent
During this period, the unemployment rate was 25 percent and the wages for those who still had jobs fell to around 42 percent. The total economic out fell from $103 billion to $55 billion.
The economic depression of 1929 was worsened by the poor monetary policy the government had. Instead of pumping money into the economy and increasing the money supply, the Federal Reserve allowed the money supply to fall by 30 percent.
Hopefully the US will not see another economic depression like the one faced in 1929 because the government has learned the hard way of avoiding it. Many laws and government agencies were created after the Great Depression with the sole purpose of preventing a repeat of the Great Depression.
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