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The Great Depression

The Great Depression. 1930’s Chapter 11 Notes. The Great Crash. Gross national Product (GNP) – the value of goods and services produced in a nation during a specific period GNP increased by 30% from 1922-1928 Led to reckless activities – 1 in 5 Americans owned a car. Stock Market Expansion.

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The Great Depression

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  1. The Great Depression 1930’s Chapter 11 Notes

  2. The Great Crash • Gross national Product (GNP) – the value of goods and services produced in a nation during a specific period • GNP increased by 30% from 1922-1928 • Led to reckless activities – 1 in 5 Americans owned a car

  3. Stock Market Expansion • Economy was excellent in the 1920s • Investors were enthusiastic with the stock market – many stocks quadrupled in value

  4. False Sense of Security • Positive economic trends masked the trouble that lay ahead. • The stock market had been booming for a decade • Corporate profits soared • Unemployment was low • Welfare capitalism and credit increased workers buying power

  5. Election of 1928 • Herbert Hoover – Republican • Never held public office • Oversaw America’s food production during WWI • Directed relief records post WWI • Supported prohibition • Al Smith – Democrat • 1st Catholic to run for Presidency • Natural politician • Supported Alcohol sales

  6. Who Won? Al smith Herbert Hoover

  7. Economic Weaknesses • 1%- wealthiest with a 60% growth • Most workers only had 8% growth • Easy credit allowed people to buy automobiles, radios, vacuum cleaners, and other products rolling off assembly lines.

  8. Credit and the Stock Market • Investors used credit to purchase stocks • Buying on margin – buying stocks with loans from stock brokers • Example: investor wants to buy 100 shares of stock at $10 a share. Pays stock broker $500 and borrows $500 from stock broker. Investor is to pay off debt when they sell stock • Why is this risky?

  9. Federal Reserve • Nation’s central bank • Regulates nations money supply in order to promote healthy economic activity • Tried to regulate economy but corporations loaned money to stock brokers to loan money to investors

  10. The Stock Market Crashes • October 24-29 stock market declined and officially crashes.

  11. Effects of the Crash • Margin buyers had to pay loans back • Many lost their entire life savings • Banks – many were invested in the market and depositors withdrew their money which took all money from the banks. • Business – banks couldn’t give loans, consumers stopped spending, layoffs followed due to decline of incoming revenue • Overseas – couldn’t loan money overseas, industrialization stopped across Europe

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