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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

1930’s

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
  • 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
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
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