Typically, the economy recovers fairly quickly from a recession. Why d

Typically, the economy recovers fairly quickly from a recession. Why did this NOT happen in the United States during the Great Depression?

What will be an ideal response?

ANSWER

The 25% decline in the price level from 1930-1933 triggered a debt deflation. The loss of net worth increased adverse selection and moral hazard problems in the credit markets and increased and prolonged the economic contraction.