bust. With the economy falling in shambles and companies defaulting on loans, nearly all private and corporate investment ceased. Companies couldnt afford to expand, and in fact, many had to consolidate in order to cover the margins on their loans. This meant postponing hiring and laying workers off, which caused unemployment to skyrocket. With people now willing to work for less money, wages lessened too. At the same time prices rose in an attempt by companies to make some amount of profit off the goods.Because the governments prevailing economic theory was based on laissez-faire economics, the government believed that recessions were self-correcting. Eventually unemployment and inflation stopped declining, but not before the U.S. lost 1/3 of its output and 25% of the workforce was unemployed.In the end, it was World War II that brought us out of the Great Depression. With war at hand, the government began pumping massive amounts of money into the economy. Production and inflation increased. More jobs were available and wages rose. At the wars end there was a brief recession while the economy reacted to a loss of the money the government had been pumping in, but the big picture demonstrated American optimism for victory was high, and as such the faith of Americans in their country followed their increased patriotism. The market had finally corrected....
