Industries that suffered the most included construction, agriculture, shipping, mining, and logging as well as durable goods like automobiles and appliances that could be postponed. The economy reached bottom in the winter of 1932-33; then came four years of very rapid growth until 1937, when the Recession of 1937 brought back 1934 levels of unemployment. The depression caused major political changes in America. Three years into the depression, Herbert Hoover lost the 1932 presidential election to Franklin Delano Roosevelt in a sweeping landslide. Roosevelt's economic recovery plan, the New Deal, instituted unprecedented programs for relief, recovery and reform, and brought about a major realignment of American politics.

Current theories may be broadly classified into two main points of view. First, there is orthodox classical economics, monetarist, Keynesian, Austrian Economics and neoclassical economic theory, which focuses on the macroeconomic effects of money supply, including Mass production and consumption. Second, there are structural theories, including those of institutional economics, that point to underconsumption and over-investment (economic bubble), or to malfeasance by bankers and industrialists.

There are multiple originating issues: what factors set off the first downturn in 1929, what structural weaknesses and specific events turned it into a major depression, how the downturn spread from country to country, and why the economic recovery was so prolonged.

In terms of the initial 1931 downturn, historians emphasize structural factors and the stock market crash, while economists point to Britain's decision to return to the Gold Standard at pre-World War I parities ($10.98 Pound). The vast economic cost of World War I weakened the ability of the world to respond to a major crisis.

Economists dispute how much weight to give the stock market crash of October 1929. According to Milton Friedman, "the stock market in 1929 played a role in the initial depression." It clearly changed sentiment about and expectations of the future, shifting the outlook from very positive to negative, with a dampening effect on investment and entrepreneurship, but some feel that an increase in interest rates by the Federal government could have also caused the slow steps into the downturn towards the Great Depression. Thomas Sowell, on the other hand, notes that the rise in unemployment had peaked at 9% two months after the crash, and had fallen to 6.3% by June — he blames the later unemployment rate on the tariffs that Hoover passed against the advice of economists in that same month, and says that six months after their implementation unemployment rose to the double digit figures that characterized that decade.

In the "First New Deal" of 1933-4, programs, such as the National Recovery Administration (NRA), sought to stimulate demand and provide work and relief through increased government spending. A series of panels comprising business leaders in each industry set regulations which ended what was called "cut-throat competition," which kept forcing up prices and profits for everyone.

The NRA, which ended in 1939, had these roles:

In 1934-36, during what the US department of state calls the "Second New Deal," Roosevelt and his party moved left, and added social security; the Works Progress Administration (WPA), a national relief agency; and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. Unemployment fell by ⅔ in Roosevelt's first term (from 25% to 9%, 1933–1937), but then remained high until 1942.

In 1929, federal expenditures constituted only 20% of the GDP. Between 1933 and 1939, federal expenditures tripled, but the national debt remained about level at 40% of GNP. (The debt as proportion of GNP rose under Hoover from 20% to 40%; the debt as % of GDP soared during the war years, 1941-45.) After the Recession of 1937 and Republican victories in the 1938 elections, opponents of the New Deal, who called themselves conservatives, formed a bipartisan conservative coalition to stop further expansion of the New Deal. By 1943, they had abolished all of the relief programs with the exception of Social Security. The labor laws were revised by conservatives in the Taft Hartley Act of 1947.

The New Deal was, and still is, controversial and widely debated. One small voluntary response survey from 85 Ph.D. holding members of the Economic History Society, which the author stated may not be representative of all economic historians, showed that there were statistically different opinions between economic historians who taught or studied economic history and those that taught or studied economic theory. The former were in consensus that the New Deal did not lengthen and deepen the depression, while the latter were more evenly divided. The Great Depression and the New Deal remain a benchmark amongst economists for evaluating severe financial downturns, such as the economic crisis of 2008.