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Causes of the Great Depression

Learn about the characteristics of the 1920’s stock market and the causes of the Great Depression, including stock market problems, bank failures, overproduction, economic isolationism, and mistakes by the Federal Reserve.

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Causes of the Great Depression

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  1. Causes of the Great Depression

  2. Objectives • Describe the characteristics of the 1920’s stock market • Identify the causes of the Great Depression

  3. Causes of The Depression I. Stock Market A. Problems: 1. Margin (borrowing) 2. Speculation (guessing) B. Turning Point: 1. Oct. 21st – Oct. 29th *BLACK TUESDAY a. $30 billion lost

  4. In order to protect loans made by stockbrokers to investors who bought stocks on margin, brokers could issue a • a. collateral. • b. speculation call. • c. margin call. • d. foreclosure. 5

  5. October 29, 1929, the day when stock prices took the steepest dive of that time, is known as • a. Black Thursday. • b. Black Tuesday. • c. Bloody Monday. • d. Panic Tuesday. 5

  6. Banks in Tailspin II. Bank Failures A. Structure of Banks 1. No separation between savings/investment banks a. Banks would invest savings to maximize bank profits B. Bank Runs 1. 10% of nations banks close

  7. For some banks, the losses they suffered in the crash were more than they could absorb and they were forced to • a. increase interest rates • b. approve more loans. • c. attract more depositors. • d. close. 5

  8. Overproduction III. Overproduction A. Uneven Wealth 1. 5% owned 30% of nations wealth B. Buying on Credit/Installments IV. Economic Isolationism A. Overseas investing B. Hawley-Smoot Tariff - export trade

  9. In 1929 the top 5 percent of all American households earned 30 percent of the nation’s income, which is • a. an uneven distribution of wealth. • b. supply-side economics. • c. a bull market. • d. a recession. 4

  10. What severely dampened commerce on both sides of the Atlantic and intensified the Depression in the United States? • a. the bull market • b. the Federal Reserve • c. Black Tuesday • d. the Hawley-Smoot Tariff 10

  11. Federal Reserve Mistakes V. Mistakes by Federal Reserve A. Interest rates fueled: 1. Risky bank loans 2. Buying on Credit 3. Speculation in Stocks 4. Companies to take loans to expand businesses

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