The United States Federal Reserve s Quantitative Easing...

INTRODUCTION As part of our term project for the Topics in Macroeconomics class we were assigned the topic of linking the Keynesian view with the Great Depression of the 1930s as well as using it to explain and critically evaluate the United States Federal Reserve’s Quantitative Easing policy, which was employed in an effort to combat the downfall of the world economy in the wake of the financial crisis of 2008. The following resources were utilized to help us carry out our project: †¢ Quantitative Easing: A Keynesian Critique By Thomas I. Palley †¢ The History of Macroeconomics from Keynes’s General Theory to the Present By M. De Vroey and P. Malgrange †¢ Macroeconomic Principles – Chapter 17 By Libby Rittenberg and Tim Tregarthen WHAT†¦show more content†¦Policies that made the situation worst. CAUSES OF GREAT DEPRESSION The effect of great depression was mostly recorded in the United Nation. So we are going to discuss the causes that affected the U.S economy with a brief look at how the world economy was affected as a result. The main cause that is noted in history was the decline in the consumption level of the consumer, this had a direct effect on the production output and the inventories increased as the consumption level decreased to a great level. Due to this setback the U.S economy was brought down to the bottom, the aggregate demand decreased at a substantial level. THE MAIN CAUSES OF THE GREAT DEPRESSION Contrary to popular belief, the Great Depression did not originate from the stock market crash of 1929. Yes, the stock market crash did result in numerous people (mostly wealthy investors) losing a lot of money, but despite the gravity of the stock market crash we are reluctant to blame the stock market crash as a trigger. The roots of the Great Depression can be traced back to the First World War, which saw a large American infantry being mobilized. This mobilization meant that a larger number of resources were required to sustain the war efforts. Farmers across the US started to raise their production and consequently expanded rapidly to provide