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Understanding Economic Cycles: From Prosperity to Depression in the 1920s

Explore the economic cycle from prosperity to depression in the 1920s. Learn about the different stages an economy can go through, including the impacts of events like the 1929 stock market crash. Discover how prosperity turned into the Great Depression.

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Understanding Economic Cycles: From Prosperity to Depression in the 1920s

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  1. Economic Crash Ch. 3 (p. 63, 66, 85)

  2. Economic Cycle

  3. Economic Cycle • Different stages that an economy can go • Prosperity– economy booming, income levels high, unemployment low • People spending a lot of money, possibly leading to inflation • aka “Boom” • Recession– production low, unemployment high • People have less money, spending little, economy slows down • aka “Bust” - Depression – severe recession, mass unemployment and poverty • Recovery– demand for goods increases, more jobs, higher incomes, economy improves • Prosperity again

  4. 1920s Economy • Post-WWI to early 1920s – factories closing down, veterans returning looking for jobs, high unemployment, low spending • Recession

  5. 1920s Economy Early to mid-1920s - economy improved (natural resources and manufacturing) • manufacturing (factories) brought many people to cities • urbanization = movement of people from rural Canada (country, farms) to urban Canada (cities) • industry often located in downtowns, not nice places to live • created slums/pollution; wealthy moved away from downtown

  6. 1920s Economy • United States replaces Britain as most important trading partner (after WWI, Britain in debt and US wealthy) • US companies invest heavily in Canada, export goods to US • US companies build branch plants in Canada (ex. auto industry) • Branch Plant = factory/office set up in Canada, but owned or controlled by foreign companies • by end of 1920s US companies own large proportion of Canadian industries (oil, machinery, chemical, rubber, and electrical industries) • Pumped money into Canadian economy, but US benefited the most • Recovery to Prosperity

  7. Also during 1920s - Prohibition in Canadian provinces (WWI to early 1920s) o prohibition = sale and consumption of alcohol prohibited • prohibition pushed by temperance movement, primarily women • soldiers returned, prohibition unpopular, laws repealed early 1920s • replaced with government controlled liquor stores • national prohibition in United States 1919-1933 • large bootlegging industry in Canada • bootlegging = importing alcohol illegally into US and/or making it yourself to sell • extremely profitable, but dangerous • often controlled by organized crime (Al Capone, Mafia) • “rum-runners” smuggled alcohol across the border to US • sometimes caught by US Customs or were killed

  8. Tuesday, October 29, 1929 - “Black Tuesday” • New York Stock Exchange collapsed (economic disaster) • stock market crash = prices of all stocks fall sharply and quickly • Canada goes from Prosperity straight to Depression • End of Roaring Twenties, beginning of the Great Depression

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