The causes of the great depression
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The causes of the great depression. Wait… what’s the great depression?. The great depression. Date: 1929-1939 Definition: a period of economic depression in the United States and the rest of the world

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The causes of the great depression

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The causes of the great depression


Wait… what’s the great depression?


The great depression

  • Date: 1929-1939

  • Definition: a period of economic depression in the United States and the rest of the world

    • Economic depression occurs when an economy produces fewer goods and services and employs fewer people

  • Significance

    • Huge cost to human well-being

    • Transformed the role of the US federal government in people’s daily lives


Five long-term Causes of the great depression

  • Monetary policy

  • Overproduction

  • Inequality

  • Speculation

  • Trade

Day 3

Day 1

Day 2

Day 4


Day 1: overproduction and inequality


overproduction

  • In your notes: Is it possible for an economy to produce too much stuff? What might be the positive and negative consequences of producing too much?


Market simulation

  • Some of you are producers – your job is to sell golf pencils (provided by me) for as much profit as possible

  • Some of you are consumers – your job is to buy golf pencils from the producers for as little money as possible

  • Some of you are observers – be ready to answer questions on the worksheet


round 1

  • One producer with one golf pencil to sell

  • Five consumers, with budgets of 20 cents each


round 2

  • Two producers with five golf pencils each

  • Five consumers with budgets of 20 cents each


round 3

  • Ten producers with ten pencils each

  • Three consumers, with budgets of 5-25 cents each


round 4

  • Two producers with five golf pencils each

  • Ten consumers

    • Eight consumers get two cents each

    • Two consumers get 50 cents each


round 5

  • Five producers with five golf pencils each

  • Ten consumers

    • Eight consumers get two cents each

    • Two consumers get 50 cents each

    • But consumers are going to get some bad news before buying begins…


So what does this have to do with the depression?


Basic economic principles

  • Prices are set by the combination of supply and demand

    • When demand > supply, prices go up

    • When supply > demand, prices go down

  • The balance of power depends on the distribution of wealth

    • When wealth is equally distributed, individual crises (like tuition or medical bills) don’t hurt the economy much

    • When wealth is heavily concentrated, a crisis for the rich means a crisis for the whole economy


Overproduction In the great depression

  • Agricultural overproduction

    • Farmers increased production significantly during WWI – and took on huge debts to do this

    • After WWI ended, demand fell sharply and farm prices crashed

    • Individual farmers kept production high, since profits were low

  • Similar problem in industry – factory methods made production increase, but eventually Americans ran out of money for new goods


Inequality in the 1920s

  • In the 1920s, the rich became far richer while the poor became only slightly less poor

  • Made worse by tax cuts for the rich under Herbert Hoover

  • Result: limited demand for consumer goods


Exit ticket

  • How did overproduction make the American economy unstable in the 1920s?

  • How did inequality make the American economy unstable in the 1920s?


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