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Causes of the Great Depression. Basic Economic Principles Overproduction Dependence on Exports Tariffs and US Protectionism WWI Debt Stock Market Speculation. Basic Economic Principles. Oct 29 th 1929 Marked the beginning of a recession which progressed to a decade long Depression.

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causes of the great depression

Causes of the Great Depression

Basic Economic Principles

Overproduction

Dependence on Exports

Tariffs and US Protectionism

WWI Debt

Stock Market Speculation

basic economic principles
Basic Economic Principles
  • Oct 29th 1929 Marked the beginning of a recession which progressed to a decade long Depression
market vs mixed
Market vs Mixed

Market Economy

Mixed Economy

  • free enterprise system
  • Means of production owned by Individuals
  • Products, services and prices determined by individuals
  • The government has some involvement
  • Government-owned industries
  • Limitations on worker’s right to strike
  • Subsidies to support certain industries
supply and demand
Supply and Demand

Prices are determined by Supply and demand

  • Supply - how much of a product is available
  • Demand – how much people want the product
  • When supply is low demand is high and visa versa

- Ex Wheat during WWI

economic cycles
Economic Cycles
  • A regular cycle of Prosperity , Recession and Recovery
  • Expansion in economic activities results in a period of prosperity
  • followed by a slowdown in the economy called a recession
  • Recovery is when the economy begins to grow again
overproduction
Overproduction

WWI and the Boom of the 1920s caused massive expansion in industry

When the economy slowed down, many companies faced overproduction

  • Produced more goods than sold
overproduction solution
Overproduction Solution?

Industries:

  • Lowered prices/stockpiled goods
  • Decreased production leading to layoffs

Layoffs meant fewer people could afford to buy consumer goods so sales slowed down more!

dependence on exports
Dependence on Exports
  • 1920s Canada dependent on export of Primary resources
  • Wheat from the Prairies
  • Wheat became overproduced internationally leading to fall in demand and therefore price
us tariffs and protectionism
US Tariffs and Protectionism
  • US was Canada’s largest trade and investment partner
  • US imposed high Tariffs
  • Made imports more expensive (wheat)
  • This protectionism made other countries impose tariffs causing a slowdown in world trade
wwi debt
WWI Debt
  • US lent several countries money during WWI
  • Many now relied on trade to with the US to raise money to pay back
  • As protectionism grew, the ability to trade and pay back loans decreased

GERMANY WAR REPERATIONS!!

stock speculation process
Stock Speculation Process
  • 1920s Companies want to expand so they sell stocks

Many investors bought “on margin”

  • Pay 10% of the stock price assuming that when the price of the stocks increased the remaining 90% would get paid
  • Loans easy to get, demand drove up price of stock beyond real value
stock market crash oct 29 th 1929
Stock Market Crash Oct 29th 1929
  • Investors start selling stocks to cash in!
  • Rush of followers

As a result Stock prices fell

  • Massive panic as people rushed to sell
  • Causes stocks to fall even more

Oct 29th 19129 Black Tuesday

New York Stock Exchange collapsed

- Caused world wide collapse

the dust bowl
The Dust Bowl
  • Prairie land during the 1920s-Alberta, Saskatchewan
  • WWI and the 1920s Many farmers planted only wheat due to high demand and prices
  • One crop farming is very hard on the soil
  • 8 year Drought on the Prairies
  • High winds blew away top soil
  • Plague of Grasshoppers
  • Wiped out any crops that managed to survive
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