boom (prosperity) high consumer spending (cash in victory bonds, installment buying) federal reserve...
TRANSCRIPT
BOOM(Prosperity)
High Consumer Spending
(Cash in Victory Bonds, Installment Buying)
Federal Reserve Keeps Interest Rates Low:
Easy Credit for Individuals & Businesses
Businesses Expand Production:
Build More Factories/Stores, Hire More Workers
Stock Prices Soar in Unregulated Market: “Buying on Margin,” “Insider Trading,”
Laissez-faire Gov. Policies… Low Taxes
Businesses Expand Production Further
The Circular Flow of Economic Activity
Workers/ Consumers
Businesses
(Producers/ Employers)
$
$
Products
Labor
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Decline in Construction
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Decline in Construction of New Homes
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Tariff Increases
Hawley-Smoot Tariff (1930)
October 1929… President Hoover publicly pledged to sign the Hawley-Smoot Tariff which would raise tariffs on some goods as high as 60%.
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Decline in Construction of New Homes
The Stock Market Crash
October 24: “Black Tuesday,” Dow Jones Dropped 12.8% as 16.4 million shares were traded
October 29: “Black Thursday,” Dow Jones Dropped an additional 12%, losing $14 billion in value
Total Losses were $30 billion in one week (10 times the Federal Budget in 1929)
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Stock Investors Can’t Repay Loans to Banks
Decline in Construction of New Homes
Bank Runs
Banks Only Keep a Fraction of Depositors’ Cash on Hand… Banks
Cannot Give Everyone Their Money at the Same Time
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Stock Investors Can’t Repay Loans to Banks
Bank “Runs” Occur as Banks Run Out of Cash
Decline in Construction of New Homes
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Stock Investors Can’t Repay Loans to Banks
Bank “Runs” Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
Decline in Construction of New Homes
Business Failures
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Stock Investors Can’t Repay Loans to Banks
Bank “Runs” Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
Businesses Fail
Decline in Construction of New Homes
Unemployment
1/3 of the Nation
Becomes Unemployed!
Bust(Great Depression)
Farmers Produce Surplus in 1920s… Low Crop Prices
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to Europe
Europeans Can’t Afford to Buy American Products
Businesses Cut Back on Production… Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued… Stock Market Crashes
Stock Investors Can’t Repay Loans to Banks
Bank “Runs” Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
Businesses Fail
Decline in Construction of New Homes
Unemployment Increases