Crash & Depression

Section 1

The Economy in the Late 1920’s

During the 1920’s, rising wealth and a booming stock market gave Americans a false sense of faith in the economy.

The Economy Appears Healthy

When Hoover became President 1928, everyone expected the economy to

remain strong.

Economic Danger Signs

1. Uneven Prosperity—the rich got richer.

2. Buying on Credit—people bought products whether they could afford them or not.

3. Playing the Stockmarket—speculation—the practice of making high-risk investmentsBuying on margin—buying stock on credit.

4. Too Many Goods, Too Little Demand—overproduction caused some industries to slow in the 1920’s.

5. Trouble for Farmers—after the war, the price of agricultural products dropped.

6. Trouble for Workers—While companies grew wealthy, most laborers still worked long hours for low wages.

Section 2

The Stockmarket Crash

In October 1929 panic selling caused the U.S. stock market to crash. The crash led to a worldwide economic crisis called the Great Depression.

The Market Crashes

1. Black Thursday—some stock prices began to fall and some brokers began to call in loans.

2. Black Tuesday—October, 1929, a record 16 million shares were sold.

The collapse of the stock market is known as the Great Crash.

Business cycle—periods in which the economy grows, then contracts.

Brokers and banks called in their loans, but people did not have cash to pay them.

The Crash Affects MillionsGreat Depression—a severe

economic decline that lasted from 1929 until the U.S. entered WWII.

Gross National Product—(GNP) the total value of goods and services a country produces annually.

1. Banks Close—Thousands of banks closed their doors when they could not return their depositors’ money.

2. Impact on the World—When the U.S. economy fell, the global economic system began to crumble.

Causes of the Depression

1. Overspeculation

2. Government policies

3. An unstable economy

Section 3

Social Effects of the Depression

Most people were not immediately affected by the 1929 crash. But by the early 1930’s, wage cuts and unemployment brought widespread suffering.

1. Hoovervilles—The hardest hit were those at the bottom of the economic ladder. Homeless people sometimes built shanty towns, with shacks of tar paper, cardboard, or tin. They were called Hoovervilles.