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During the Great Depression, businesses and the government spent more in the first half of 1930, than in the previous year. However, the consumers cut back their expenditures by 10%. They had learned from their stock market losses in 1929. In the beginning to mid-1930, there was a severe drought, which ravaged the agricultural heartland of the United States. The interest rates were dropping to low levels. Nonetheless, the expected deflation and the reluctance of the citizens to borrow, led to two things (Schultz, 1999).
There was the consumer spending and the depression of the investment. By May, there was the decline of the automobile sales. It was below the levels of 1928. The prices were going down. However, the wages remained steady. In 1931, the deflationary spiral of the Great Depression began. The farmers were the worst hit, the commodity prices had plunged. The unemployment was high in the mining and logging areas. Only a few jobs were available (Richard ed. 2002).
During the Great Depression, the decline in the U.S. economy pulled down other countries'. Later, the internal strengths or weaknesses of each nation, made the conditions better or worse. There were protectionist policies, such as the retaliatory tariffs in other states and the 1930 Smoot-Hawley Tariff Act. The exacerbated a collapse in the global trade.
There was a steady decline by late 1930. Now, it had affected the world economy. It did not reach the bottom until 1933.
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