Social and Economic Impact Prior to the great depression, the U.S. economy alternated between periods of prosperity and sharp economic decline. During the great depression, aggregate demand dropped sharply, causing the price level and real GOP to decline. As aggregate output declined, the unemployment rate jumped, climbing from around 3 percent in 1929 to 25 percent in1933.There were several factors that played a major role in the Great Depression. The main explanation was overproduction of both farm and factory and the unequal distribution of wealth throughout the 1920s. The excessive speculation in the 1920s kept the stock market at a deceitful high, and came crashing down in 1929. Over extended credit at home and abroad added to the already crumbling economy. The Hawley Smoot Tariff of 1930 did little to help the farmers and plunged America and other nations deeper into the depression that had already begun. Three developments in the years following the Great Depression changed the outlook on fiscal policy in the U.S. The first was a shift from the laissez-faire philosophy, which had guided the economy before, and the embrace of the Keynes Theory. The second development was the impact of World War II on output and employment.The third development was the passage of the employment act of 1946, which gave the government the responsibility for promoting full employment and price stability. Before the depression and Keynes Theory, the government was mostly concerned with a balanced budget, but later used the fiscal policy to influence aggregate demand and improve economic stability. The Great Depression showed no favoritism among the rich and poor. The rich and poor alike were forced to stand on street corners selling their possessions or line up at soup kitchens begging for food. The rich, for the first time, were forced to walk in the same shoes as the poor. This structured mobility shook the foundations of America...
