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The Great Depression. 1930’s Chapter 11 Notes. Before The Great Crash. Gross national Product (GNP) – the value of goods and services produced in a nation during a specific period GNP increased by 30% from 1922-1928 Led to reckless activities – 1 in 5 Americans owned a car.

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The great depression

The Great Depression


Chapter 11 Notes

Before the great crash
Before The Great Crash

  • Gross national Product (GNP) – the value of goods and services produced in a nation during a specific period

  • GNP increased by 30% from 1922-1928

  • Led to reckless activities – 1 in 5 Americans owned a car

Stock market expansion
Stock Market Expansion

  • Economy was excellent in the 1920s

  • Investors were enthusiastic with the stock market – many stocks quadrupled in value

False sense of security
False Sense of Security

  • Positive economic trends masked the trouble that lay ahead.

    • The stock market had been booming for a decade

    • Corporate profits soared

    • Unemployment was low

    • Welfare capitalism and credit increased workers buying power

Election of 1928
Election of 1928

  • Herbert Hoover – Republican

    • Never held public office

    • Oversaw America’s food production during WWI

    • Directed relief records post WWI

    • Supported prohibition

  • Al Smith – Democrat

    • 1st Catholic to run for Presidency

    • Natural politician

    • Supported Alcohol sales

Who won
Who Won?

Al smith

Herbert Hoover

Economic weaknesses
Economic Weaknesses

  • 1%- wealthiest with a 60% growth

  • Most workers only had 8% growth

  • Easy credit allowed people to buy automobiles, radios, vacuum cleaners, and other products rolling off assembly lines.

Credit and the stock market
Credit and the Stock Market

  • Investors used credit to purchase stocks

  • Buying on margin – buying stocks with loans from stock brokers

  • Example: investor wants to buy 100 shares of stock at $10 a share. Pays stock broker $500 and borrows $500 from stock broker. Investor is to pay off debt when they sell stock

  • Why is this risky?

Federal reserve
Federal Reserve

  • Nation’s central bank

    • Regulates nations money supply in order to promote healthy economic activity

  • Tried to regulate economy but corporations loaned money to stock brokers to loan money to investors

The stock market crashes
The Stock Market Crashes

  • October 24-29 stock market declined and officially crashes.

  • "Black Tuesday", October 29, 1929

People lost everything
People lost EVERYTHING


    • People Panic

    • Withdraw all of their money at the same time

  • Banks ran out of money to give back to their customers


  • Example of a Great Depression Bank Run

Effects of the crash
Effects of the Crash

  • Margin buyers had to pay loans back

  • Many lost their ENTIRE life savings

  • Banks – many were invested in the market and depositors withdrew their money which took all money from the banks.

  • Business – banks couldn’t give loans, consumers stopped spending, layoffs followed due to decline of incoming revenue

  • Overseas – couldn’t loan money overseas, industrialization stopped across Europe

3 main causes for the great depression
3 Main Causes for the Great Depression

  • 1. People had a false sense of security

  • 2. The Stock Market Crash (Black Tuesday)

  • 3. Buying stock “on margin” and other mismanagement of money