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The Great Depression was caused by a vicious cycle Ð banks were lending too much money to people who could not pay the banks back. This caused thousands to go out of business as banks stopped lending money. At the same time, too many people were borrowing money to use on risky investments. This caused heavy debt. Since factories could not borrow money, they had to lay off people as demand for products dropped. By the time President Hoover reacted, it was too little too late. The effects of the Great Depression included a 25 percent unemployment rate, about 6000 banks closing, the marriage and Birth Rate declined sharply as did the US total production of goods and just about everybodyÕs income was cut in half leaving many homeless.

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