One of the reasons why the economy took a dramatic downturn was because of the lack of worthy government policies such as the monetary policy. The monetary policy was a policy that was enacted by the Federal Reserve (FED) to avoid any panic or collapse of the economy. It was a policy that was enacted to increase the interest rates along with the increase in money supply as well. One of the many people that believed this policy would better the US economy was Milton Friedman, whom was a monetarist. He “incorrectly believed that the money supply determines the level of economic activity. In his view, an increase in the money supply will lead to more economic activity.” (Borowski). Before the Great Depression had occurred, the economy was booming because of the massive productions of products such as cars and telephones. This time period was considered as the “Roaring Twenties” because the US’s economy was the most richest of all the rest. So, the idea of the monetary policy was thought out to be a good idea until it had caused the stock market crash in the year of 1929. Friedman thought that the economy began to decline because of the Federal Reserve did not “print out enough money” (Borowski). Though, the Federal Reserve also began to boost the money supply which caused the poor decision making of investors leading to the …show more content…
This resulted in the stock speculation for which many businesses underwent the time to increase their prices to sell stock. This led to the uneven distribution of wealth between “the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy” (Novel Guide). About 99% of the population had a 9% increase in their income, while the 1% had a 75% increase in their income. As a result of this, “[T]he top 25% of the population took in more than 55% of the national income.” (Novel