8. How did Federal Reserve policies affect the Great depression?

The Great Depression began in August 1929, when the economic expansion of the Roaring Twenties came to an end. A series of financial crises punctuated the contraction. These crises included a stock market crash in 1929, a series of regional banking panics in 1930 and 1931, and a series of national and international financial crises from 1931 through 1933. The downturn hit bottom in March 1933, when the commercial banking system collapsed and President Roosevelt declared a national banking holiday.1  Sweeping reforms of the financial system accompanied the economic recovery, which was interrupted by a double-dip recession in 1937. Return to full output and employment occurred during the Second World War.

Not only did the Federal Reserve fail to prevent the Great Depression but it was primarily responsible for its length and severity. The Federal Reserve created an unsustainable boom in the 1920s by lowering interest rates. Rothbard estimated that the money supply had increased by 61.8 percent between 1921 and 1929.

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The Federal Reserve created an unsustainable boom in the 1920s by lowering interest rates

Explanation:

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