ECONOMICS OF THE GREAT DEPRESSION 1929-1940

CAPITALISM IN A FREE MARKET SYSTEM Buyers and sellers enter into transactions freely Ability to make economic decisions Individuals own private property Freedom to risk wealth in business venture Ability to determine what to buy and price willing to pay

Capitalism “Perfect Market” Market will reach a state of “equilibrium where the seller is willing to sell units of goods for the price that consumers are willing to pay

Business Cycle

Output

GROSS DOMESTIC PRODUCT (GDP) Final monetary value of all finished goods and services in a fiscal year Intermediate goods are used to make finished products and are not included in final total of GDP Real GDP is adjusted for inflation

Nominal GDP (trillions) Year  GDP Growth Rate Real GDP (trillions) Nominal GDP (trillions) GDP per Capita Inflation 1929 NA $1.057 $.105 0.6% 1930 -8.5% $.967 $.092 -6.4% 1931 $.905 $.077 -9.3% 1932 -12.9% $.788 $.060 -10.3% 1933 -1.3% $.778 $.057 0.8% 1934 10.8% $.862 $.067 1.5% 1935 8.9% $.939 $.074 3.0% 1936 12.9% $1.061 $.085 1.4% 1937 5.1% $1.115 $.093 2.9% 1938 -3.3% $1.078 $.087 -2.8% 1939 8.0% $1.164 $.094 0.0% 1940 8.8% $1.266 $.103 0.7% 1941 17.7% $1.490 $.129 9.9%

Depression Era Unemployment Statistics Percentage of Labor Force Year Population Labor Force Unemployed Percentage of  Labor Force 1929 88,010,000 49,440,000 1,550,000 3.14 1930 89,550,000 50,080,000 4,340,000 8.67 1931 90,710,000 50,680,000 8,020,000 15.82 1932 91,810,000 51,250,000 12,060,000 23.53 1933 92,950,000 51,840,000 12,830,000 24.75 1934 94,190,000 52,490,000 11,340,000 21.60 1935 95,460,000 53,140,000 10,610,000 19.97 1936 96,700,000 53,740,000 9,030,000 16.80 1937 97,870,000 54,320,000 7,700,000 14.18 1938 99,120,000 54,950,000 10,390,000 18.91 1939 100,360,000 55,600,000 9,480,000 17.05 1940 101,560,000 56,180,000 8,120,000 14.45 1941 102,700,000 57,530,000 5,560,000 9.66

INFLATION/DEFLATION Value of money decreases with Inflation Cost (price) of goods and services rises Deflation Cost (price) of goods and services decreases

Year Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 1930 0.00% -0.58% -0.59% 0.59% -1.75% -4.05% -4.62% -5.20% -6.40% 1931 -7.02% -7.65% -7.69% -8.82% -9.47% -10.12% -9.04% -8.48% -9.64% -9.70% -10.37% -9.32% 1932 -10.06% -10.19% -10.26% -10.32% -10.46% -9.93% -10.60% -10.67% -10.74% -10.20% -10.27% 1933 -9.79% -10.00% -9.35% -8.03% -6.62% -3.68% -2.22% -1.49% -0.75% 0.76% 1934 2.33% 4.72% 5.56% 5.51% 2.29% 1.52% 3.03% 2.27% 1935 3.01% 3.76% 2.24% 0.74% 1.48% 2.22% 2.99% 1936 1.47% 0.73% -0.72% 1.46% 2.19% 1.45% 1937 2.17% 3.65% 4.38% 5.11% 4.35% 4.32% 3.57% 4.29% 2.86% 1938 0.71% -0.70% -2.08% -2.76% -3.42% -4.11% -3.45% -2.78% 1939 -1.41% -1.42% -2.82% -2.13%