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The Great Depression Ch. 13. 2
Bellringer April 14, 2015 What was the date of Black Tuesday?
Cause: ◦ The stock market crash of 1929. Stock= Allows a person to invest in a business (become part owner). Stock is divided into purchased. shares which can be ◦ Buy at a certain price- if business improves price/value of shares goes up! = PROFIT!!!
What was happening before the Crash? 1920’s- a. k. a. Roaring ’ 20 s Faith in the economy was high, everyone had money. Why? WWI- America supplies Allies with war goods= many jobs, lots of $$. Mass production of automobile and other in home products. Result: Value of stock is up, many invest to “get rich quick. ”
Hidden Problems: ◦ Unfair distribution of wealth ◦ Consumer buying slows down (credit limits are maxed out) 1929: Demand/Buying is down= value of stocks stops increasing. Worried shareholders begin to sell = prices fall. Panic sets in- everyone begins selling.
Black Tuesday: October 29, 1929= stock market crashes!! Over 6 million stocks sold Why such a big problem? EVERYONE owned stock!! Many bought stock on credit or through bank loans. When values plummet= people cannot pay debts. Businesses & banks suffer. Many lose their life savings Depression sets in!!
The Great Depression Industry Slows • As industry slowed, workers lost jobs • One out of four unemployed by 1933 • Joblessness, poverty reduced ability to buy food, goods, hurt industry even further • Banks suffered when businesses, investors failed to pay off loans; many failed
Government Response • President Herbert Hoover favored minimal government response to crisis • Some thought depression was normal adjustment to overheated economy • Hoover eventually took some actions, many felt too little too late
Roosevelt Elected President • FDR elected president, 1932 • Increased federal government’s role in lives of Americans • Pushed forward New Deal, program to fight Great Depression
New Deal • Provided government spending to help start economic recovery • Public works programs to provide jobs, government money for welfare, relief • New regulations to reform, protect stock market, banking system
New Economic Theories John Maynard Keynes – British economist Believed gov’ts could limit/prevent economic downturns Gov’t should spend money ◦ Spending would help increase economic output ◦ Factories would hire workers to meet new demand ◦ Eventually workers would begin spending, ---◦ depression would end