Economic Troubles on the Horizon

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Transcript Economic Troubles on the Horizon

The Great Depression
What would happen if you spent more money
that you actually had?
What happens when many people and
businesses are in that situation?
1. What jobs are recession proof?
What things might you do is you cannot get a job
with an established company?
What social services are available today
compared to the unemployed people of 1929?
Summarize the critical problems threatening the
American economy in the late 1920’s.
Describe the causes of the stock market crash and
the Great Depression.
Explain how the Great Depression affected the
economy in the United States and throughout the
Industries in Trouble
 Basic industries such as railroads, textiles and steel
barely made a profit in the late 1920’s
 There was less demand for mining and lumbering after
World War I
Farmers Need a Lift
 During the war demand for crops such as wheat and
corn were high
 Farmers took out loans for more equipment and land
 After WWI, the demand for such crops declined and
farmers were left with debt—farmers could not pay
loans and many of their farms went into foreclosure
 Federal price supports for key products such as wheat,
corn, cotton and tobacco
 The government would buy surplus crops at a
guaranteed prices and sell them on the world market
 President Coolidge vetoed the bill twice
What would a free market economist say about
the Congress’s bill for federal price supports?
Living on Credit
 Credit—the arrangement
in which consumers
agreed to buy now and
pay later for purchases
 When people had trouble
paying off debt, they cut
back on spending
Uneven distribution of income
 During the 1920’s rich got richer and the poor got
 More than 70% of the nation’s families earned less
than $2,500 per year (considered a decent standard of
 Many people could not afford the goods that
manufactures made
Election of 1928
 ______________( R) vs.
 Hoover wins following
the years of prosperity in
the 1920’s
Dreams of riches in the
Stock Market
 ____________________
 The most widely used
barometer of the stock
market’s health
 Made of the 30 largest
firms traded on the stock
What is speculation?
What does it mean to buy on margin?
Speculation —people bought stocks and bonds
in hope to make a quick profit
Buying on margin —paying a small percentage
of a stocks price as a down payment and
borrowing the rest
 The unrestrained buying and selling fueled the
market’s upward spiral
What can speculation and buying on margin be
compared to today?
Contrast the Great Depression with today’s
recession. Use the text book and internet to
complete a Venn diagram.
What is a recession? Two consecutive quarters of
negative growth in the GDP.
 October 29, 1929 the
bottom fell out of the
market and people lost
 Shareholders rushed to sell
their stocks
 People who bought on
margin were left with debt
and many lost their life
The Great Depression
 Period from 1929-1940
which the economy
plummeted and
Banks and Business Failures
 Many people withdrew money from banks—only to
find out that the banks had invested it in the stock
 600 banks closed in 1929
 Unemployment went from 3% in 1929 to 25% in 1933
Worldwide shock waves
 Depression was not limited the
United States
 Europeans were still trying to
recover from WWI
 Germany was forced to pay war
reparations—the Great
Depression compounded the
problems by limiting America’s
ability to import European
goods as well as making it
difficult to sell American farm
products and manufactured
goods aboard
 Highest protective tariff in history
 Designed to protect American farmers and industry, it
had the opposite effect
 Europeans retaliated with their own tariff and
worldwide trade had failed more than 40 %
Causes of the Great Depression:
Can a recession or a depression be prevented? If
you were president, what policies would you put
in place to ensure economic growth?