Beginning in 1921, the U. S. economy entered a period of strong growth. Seeing this, President Warren G. Harding cut both taxes and government spending. He then left the economy alone. The economy continued growing as Calvin Coolidge took office. Like Harding, Coolidge was not interested in guiding the economy or business. He felt that such activities were the jobs of individual states. Economic growth began to slow in 1924. This led the Federal Reserve to create $500 million in new money that banks could lend to struggling businesses and families. Instead of getting out of debt, businesses and people sunk deeper into the debts that they could not pay.
Many businesses and people cut their spending in order to pay their debts. This led to less of a demand for new products. The lower demand for new products led to fewer new jobs. As the unemployment rate grew to 25%, incomes fell by 20-50%. This led to the cycle of debt, bank failures, and inflation that pushed the United States into The Great Depression.
5
This piece outlines some of the causes of the Great Depression of the 1930s. What is one effect the author mentions?
A.
less government spending
B.
a high unemployment rate
C.
a decrease in bank failures
D.
strong economic growth