The Nation s Sick Economy

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Main Idea and Key Terms. As the prosperity of the 1920's ended, severe economic problems gripped the nationThe Great Depression has had lasting effects on how Americans view themselves and their government. Price supportCreditAlfred E. SmithDow Jones Industrial AverageSpeculationBuying on marg

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The Nation s Sick Economy

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1. The Nationís Sick Economy Chapter 22, section 1

2. Main Idea and Key Terms As the prosperity of the 1920ís ended, severe economic problems gripped the nation The Great Depression has had lasting effects on how Americans view themselves and their government Price support Credit Alfred E. Smith Dow Jones Industrial Average Speculation Buying on margin Black Tuesday Great Depression Hawley-Smoot Tariff Act

3. Economic Troubles on the Horizon As the 1920ís advanced, serious problems threatened economic prosperity Industries struggled, and many Americans could not earn a decent living Farmers grew more crops and livestock than they could sell at a profit Both consumers and farmers were steadily going deeper into debtÖ These three slippages in the economy signaled the end of an era

4. Industries in Trouble Railroads, textiles, and steel had barely made a profit in the 1920ís Mining and lumbering, which had expanded in wartime, were no longer in demand Even the boom industries of the 20ís (cars, construction, consumer goods) were weakening

5. Farmers During WWI, prices rose and international demand for crops soared Farmers had planted more and taken out loans for land and equipment Crop prices declined after the war (40%) Production was boosted to sell more crops, but only caused prices to sink more Congress passed price supports, but Coolidge vetoed them twice

6. Consumers have less $ As farmersí incomes fell, they bought fewer goods and services Americans as a whole were buying less Many Americans were living on credit Only a few Americans had any money >70% made below $2,500/year The prosperity of the era was on a fragile foundation

7. Hoover Takes the Nation 1928 Presidential Election: Hoover vs. Alfred E. Smith Hoover had never run for public office Smith was a career politician Hoover won in an overwhelming victory by pointing out the prosperity under the Republican government of the past few years

8. By 1929, some economists had warned of weaknesses in the economy Those who could afford to invested in the stock market The Dow Jones Industrial average was the most widely used barometer of the stock marketís health Throughout the 20ís, stock prices rose steadilyÖ

9. Stocks had reached 381 points, over 300 points higher than 5 years prior People engaging in speculation: buying high risk stocks for a quick profit without regard for risk People were ďbuying on MarginĒ, or paying a small down payment of the worth of the stock and borrowing the rest; if stocks declined, there was no way to pay the loan

10. The Stock Market Crashes In early September of 1929, prices rose and fell, confidence waned Some investors quickly sold their stocks and pulled out On October 24, the market took a plunge Investors began to unload their shares, but the worst was yet to come On October 29, the bottom fell out

11. Black Tuesday Shareholders frantically tried to sell before prices plunged even lower 16.4 million shares were sold that day Millions more could not find buyers People who had bought on credit were stuck with huge debts By mid-November, investors had lost $30 million, (what US spent on WWI) (Today = $324,141,089.73)

12. Financial Collapse This signaled the Great Depression, the period from 1929 to 1940 in which the economy plummeted and unemployment skyrocketed People panicked and withdrew their money from banks Banks had invested in the stock market, and did not have the money

13. By 1933, 11,000 of the nationís 25,000 banks had failed Millions lost their life savings The GDP cut in half 90,000 businesses went bankrupt Millions lost their jobs Unemployment jumped from 3% to 25%

14. Much of Europe was effected as well In 1930 Congress passed the Hawley-Smoot Tariff Act, establishing the highest protective tariff in U.S. history It was meant to help, but it did the opposite

16. Causes of the Great Depression Tariffs and war debt policies that cut down the foreign market for American goods A crisis in the farm sector The availability of easy credit An unequal distribution of income

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