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The Great Depression

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

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  1. The Great Depression

    1930’s Chapter 11 Notes
  2. 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
  3. Stock Market Expansion Economy was excellent in the 1920s Investors were enthusiastic with the stock market – many stocks quadrupled in value
  4. 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
  5. 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
  6. Who Won? Al smith Herbert Hoover
  7. 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.
  8. 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?
  9. 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
  10. The Stock Market Crashes October 24-29 stock market declined and officially crashes. "Black Tuesday", October 29, 1929
  11. People lost EVERYTHING BANK RUNS: People Panic Withdraw all of their money at the same time Banks ran out of money to give back to their customers BANK RUN EXAMPLE Example of a Great Depression Bank Run
  12. 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
  13. 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
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