Overproduction of Agriculture

1. Overproduction of Agriculture

2. Farmers were producing too much

3. U.S. grew too much that they couldn't sell

4. Competition from European farmers drove down the price of farm goods

5. By the end of the middle of the1920’s U.S. farmers were already in a depression

6. Many farmers stopped buying machinery and household goods causing the economy to slow down.

7. Deflation • With falling output, prices began to fall. • Deflation created additional problems • It increased the difficulty of paying off debts taken out during 1920s • Falling prices, encouraged people to hoard cash rather than spend (Keynes called this the paradox of thrift) • Increased real wage unemployment (workers reluctant to accept nominal wage cuts, caused real wages to rise creating additional unemployment)

8. Statistics • Price of farmland fell from $69 dollars per acre in 1920 to $31 in 1930 • In 1929 • Average American family income= $750 a year • Farmers family income= $273 a year

9. That’s why overproduction of agriculture is the most important cause of the Great Depression