TheGreat Depressionbegan in August1929, when the United States economy first went into aneconomic recession. Although the country spent two months with decliningGDP, it was not until theWall Street Crash in October 1929that the effects of a declining economy were felt, and a major worldwide economic downturn ensued. The market crash marked the beginning of a decade of high unemployment, poverty, low profits,deflation, plunging farm incomes, and lost opportunities for economic growth as well as personal advancement. Altogether, there was a general loss of confidence in the economic future.

TheGreat Depression of 1929devastated the U.S. economy. Half of all banks failed. Unemployment rose to 25 percent and homelessness increased. Housing prices plummeted 30 percent,international tradecollapsed by 60 percent, andprices fell 10 percent. It took 25 years for thestock market to recover.

But there were some beneficial effects. TheNew Dealprograms installed safeguards to make it less likely thatthe Depression could happen again.

The economy shrank 50 percent in the first five years of thedepression.In 1929, economic outputwas $105 billion,as measured bygross domestic product.That's the equivalent of $1.057 trillion today.

The economy began shrinking in August.By the end of the year,650 banks had failed. In1930, the economy shrank another 8.5 percent. GDP fell another 6.5 percent in 1931 and 12.0 percentin 1932. By 1933, the country had suffered five years of economiccontraction. It only produced $57 billion, half what it produced in 1929.That was partly because ofdeflation. Prices fell 10 percent per year.

New Deal spending boostedGDP growth10.8 percent in 1934. It grew another 8.9 percent in 1935, a whopping 12.9 percent in 1936, and 5.1 percent in 1937.

Unfortunately, the governmentcut back on New Deal spending in 1938, and the depression returned. The economy shrank 3.3 percent. But preparations for World War II sent growth up 8 percentin 1939 and 8.8 percent in 1940. The next year, Japan bombed Pearl Harbor, and the United States entered World War II.

The New Deal and spending for World War IIshifted the economy from a purefree marketto amixed economy. It depended much more on government spending for its success. Thetimeline of the Great Depressionshows this was a gradual, though necessary, process.