The Depression of the 1930s was notable among depressions not only for its severity but also for its duration.

The statistic which best represents the social impact of the Depression is the unemployment rate.

As the above graph indicates that while the economy recovered somewhat from its state in 1933 the unemployment rate remained in the 15 percent range for the rest of the decade. The unemployment rate did not drop from depression levels until the economic impact of World War II was felt. The high level of demand during that war reduced the unemployment rate to minuscule levels. While the unemployment rate should be the defining characteristic of economic depression the standard definition is in term of GDP. The level of production did recover its previous high level fairly quickly but this was still significantly below what the economy was capable of producing. The output of an economy is measured by its Gross Domestic Product and the graph below shows the decline in production from its high point in 1929 to its low point in 1933 and its subsequent recovery.

The rise in GDP was not sufficient to drop the unemployment rate from depression levels because while the GDP was growing after 1933 the labor force also was growing. Furthermore increases in productivity meant that for the same level of GDP there were fewer jobs. In order to bring down the unemployment rate the rate of growth of GDP has to be greater than the sum of the growth rates of productivity and the labor force. The table below tells what was happening to the components of demand.

The above table indicates that consumer purchases, investment and government purchases were generally increasing after 1933. Note however the decline in GDP and Investment in 1938. This was a recession within the Depression.

At this point it is worthwhile establishing a more general theory of what determines the level of demand and output in an economy. If consumer purchases is a function of income which, in turn, is a function of GDP then we must look to the components which are not a function of GDP, what are called autonomous demands, for the determinant of demand. The level of autonomous demand is the sum of investment purchases, government purchases and net exports. The graph below shows GDP plotted versus Autonomous Aggregate Demand (AAD) for the years from 1929 to 1997.

The relationship between GDP and AAD is strong but the World War II years do not fall on the line because consumers were not allowed to buy as much as they wanted to and had the income for. Nevertheless there does appear to be a strong correlation indicating that generally if AAD goes up then GDP goes up and if AAD goes down then GDP goes down. The graph below shows the times series for AAD and GDP plotted over time. The GDP graph seems to reproduce the ups and downs of the AAD graph. The collusion is that GDP recovered from the depression because the combined total of investment, government purchases and exports grew to a level that puch GDP to full employment, full utilization of capacity levels.