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GREAT DEPRESSION
Great Depression
• The Great Depression was a time period
between 1929 and 1940 in which there was
high unemployment and little economic
growth.
Measurements
• Gross Domestic Product: GDP Total value of all
goods and services produced in a country in
one year. This is a sign of economic strength.
• Unemployment Rate: Percentage of the labor
force that is unemployed but actively seeking
work.
• Inflation: An increase in the supply of money
that results in higher prices.
Lack of Consumer Demand
• Demand: The amount of a particular good or
service the population will buy at a given
price.
• Supply: The amount of a good or service
available at a certain price.
• Deflation: A general drop in prices caused by
low demand.
Lack of Consumer Demand
• How It Caused the Great Depression: Due to
deflation and lower prices, businesses began
to lose money and lay off workers. This caused
people to stop buying goods.
Tight Money Policy
• Monetary Policy: Policy that controls the supply and
value of a nation’s currency.
• Federal Reserve: This institution manages the
nation’s set monetary policy for the United States.
• Interest Rates: This is the cost of borrowing money,
usually it’s a percentage of the amount borrowed.
• Tight Money: A monetary policy of slowing down
lending to curb inflation.
Tight Money Policy
• How It Caused the Great Depression: The
Federal Reserve raised interest rates which
made borrowing money more expensive and
difficult.
High Tariffs
• Tariff: A tax on imported goods used to
encourage people to buy domestic goods
because foreign goods are more expensive.
• Trade War: This occurs when nations put
tariffs on each others goods slowing down
trade.
High Tariffs
• How it Caused the Great Depression: The
Smoot Hawley Tariff set tariffs on foreign
goods. Other nations responded by putting
tariffs on US goods.
Bank Failures
• Bank System: Banks take deposits from
customers and use that money to give loans to
other customers.
• Credit: A system where a buyer borrows
money and agrees to pay it back later, usually
with interest.
• Bank Run: When people fear the bank closing
they demand all their money at once. This can
cause banks to fail.
Bank Failures
• How This Caused the Great Depression: When
people lost confidence in their banks, bank
runs occurred. When banks went bankrupt
people’s savings were wiped out.
Stock Market Crash
• Stock: A stock is a share in the ownership of a
corporation. A stock market is where these
shares are bought and sold.
• Dow Jones: This is a measure of stock prices.
• Buying on Margin: This is when you borrow
money to buy stocks. Some people borrowed
as much as 90% of the money they used to
buy stock.
Stock Market Crash
• Speculation: People bought stocks at
artificially high prices hoping to get rich.
• Black Tuesday: On October 29th 1929, the Dow
Jones Industrial Average dropped dramatically
causing a widespread panic.
• Effect: While the stock market did not cause
the Depression, it was a sign of the economy’s
weaknesses.