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Q5. Why was the initial response of governments to Great Depression not effective?

As the Depression spread and deepened, governments desperately sought ways to revive, or at least protect, their ailing economies.  One tactic was to increase levels of protectionism; import tariffs were increased and import quotas, trading blocs, and bilateral trade pacts were established.  This only reduced world trade to one-third.  Another policy was to reduce government spending by cutting public works programs and civil servants’ salaries.  But this only created more unemployment and fewer consumers to revive the economy.

A third tactic, started by Britain, was to go off the gold standard and then devalue the British currency, which now had no gold backing it up.  The idea was to make other nations’ currencies and goods more expensive in comparison to Britain’s and thus make the cheaper British goods more appealing to British and foreign customers.  However, other countries followed Britain’s lead, so nothing was gained, and everyone’s currencies were devalued and less stable.  Therefore, the Depression deepened even more and international tensions grew.

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