Download A major factor contributing to the Great Depression

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Speculation: A risky stock purchase intended to
turn quick profits.
Herbert Hoover: United States Republican
President from 1929 to 1933.
Business cycle: The periodic expansion and
contraction of the economy.
EQ: How did the prosperity of the
1920s give way to the Great
Depression?
The students will be able to recall and
evaluate the concepts of speculation
and the business cycle.
Ch 21 Sec 1: Causes of the Depression
• During the 1920s, times were good. The
Republicans in power took credit for the
strong economy. In 1928, the country elected
Republican Herbert Hoover as President.
However, hidden economic problems soon
caused the Great Depression. The Great
Depression was a time of economic
downturn and high unemployment between
1929 and 1941.
• A few people had lots of money in the 1920s.
Others had much less. In particular, farmers
had money problems. During World War I,
they had increased their harvests to raise
more food for soldiers. After the war, larger
harvests flooded the market with cheap food
and brought down profits.
• Industrial workers, whose wages rose steadily,
did better than farmers. To buy the many new
products, workers used easy credit. This hid
the problem that not enough people could
really afford to buy products. Meanwhile,
some Americans enjoyed great wealth.
However, rich Americans were only a tiny
portion of the population. They would never
be able to buy enough goods to keep the
economy strong.
• Some economists also worried about
speculation in the stock market. Investors
often borrowed money to buy stocks then sell
them and turn a quick profit. Rapid buying
and selling raised the price of both good and
bad stocks, making the economy unstable.
Finally, all the problems began to converge.
Stock prices crashed on Black Tuesday,
October 29, 1929. Whole fortunes were wiped
out in hours.
Black Tuesday
• The stock market crash marked the beginning
of the Great Depression, a period lasting from
1929 to 1941 in which the U.S. economy
faltered, banks closed, and unemployment
soared. Many banks failed because too many
depositors feared for their money and tried
to withdraw it all at once.
• The government tried to help by passing the
Hawley-Smoot Tariff, which put high taxes on
foreign goods. Other countries then taxed
U.S. goods. The result was closed markets and
unsold goods worldwide, which destroyed
world trade. However, economists still
disagree on what was the most important
factor leading to the Great Depression. John
Maynard Keynes argued that lack of
government intervention in the economy led
to the Great Depression.
EXIT SLIP
An accurate statement about the Great Depression of
the 1930's is that
a. agriculture was the only sector of the economy to
escape the effects of the Depression
b. the trade barriers erected by major nations helped to
keep the Depression confined to the United States
c. a variety of factors combined to bring about the
economic collapse
d. a massive response by the Federal Government under
the Hoover administration failed to bring about
recovery
EXIT SLIP
An accurate statement about the Great Depression of
the 1930's is that
a. agriculture was the only sector of the economy to
escape the effects of the Depression
b. the trade barriers erected by major nations helped to
keep the Depression confined to the United States
c. a variety of factors combined to bring about the
economic collapse
d. a massive response by the Federal Government under
the Hoover administration failed to bring about
recovery
EXIT SLIP
A major factor contributing to the Great
Depression of the 1930's in the United States
was the
a. decline in farm prosperity in the 1920's
b. recent increase in population due to
immigration
c. closing of the frontier
d. heavy military spending in the 1920's
EXIT SLIP
A major factor contributing to the Great
Depression of the 1930's in the United States
was the
a. decline in farm prosperity in the 1920's
b. recent increase in population due to
immigration
c. closing of the frontier
d. heavy military spending in the 1920's