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The End of Prosperity

The End of Prosperity. Section 1 Chapter 24. Focus Questions. What was the stock market like before the crash? What were the major causes of the Great Depression, and how did it weaken the U.S. economy? How did economic hard times affect Americans?.

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The End of Prosperity

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  1. The End of Prosperity Section 1 Chapter 24

  2. Focus Questions • What was the stock market like before the crash? • What were the major causes of the Great Depression, and how did it weaken the U.S. economy? • How did economic hard times affect Americans?

  3. During the 1920s more Americans then ever owned houses and cars • 80 million Americans went to movies

  4. The Stock Market Crash • Rising stock prices was proof the economy was healthy • Bull Market– continuing rise in stock market prices • Bear Market– continuing drop in stock prices was unlikely • Many people investing in the stock market were buying on margin– buying stocks on credit with a loan from a broker • Brokers borrowed their money from banks

  5. The Stock Market Crash • Speculation– Putting money in a high-risk investment with the hope of making profit • Stock Market hit a high point in September of 1929 • October 24, 1929– Black Thursday prices dropped and by noon $9 billion had been lost (bankers help recover the market) • October 29, 1929– Black Tuesday the market completely collapsed

  6. The Stock Market Crash • Those who bought on margin lost everything • Investors had to sell everything to return money they owed • The nation then became locked down in a downward economic spiral known as the Great Depression

  7. The Economy Collapses • Banks were hurt in two ways • Banks and small investors suffered great losses from their stock investments • They had encouraged their customers to buy stocks (even risky investments) • Customers could not repay their bank loans • Many banks then closed

  8. The Economy Collapses • The closing of banks caused people to panic and millions rushed to withdraw their deposits • Many banks ran out of money and shut their doors • Millions of people lost their life savings

  9. The Economy Collapses • Banks closing left businesses without corporate savings and operating accounts • Businesses were then forced to close or to stop any expansion

  10. The Causes • The business cycle is a system in which surplus leads to layoffs but eventually the surplus is bought and businesses bounce back (this was NOT the case) • Before 1929 the economy followed the business cycle and recovered on its own • Most agree that overproduction and global trade problems helped cause the Great Depression

  11. The Causes • Between 1920-1929 productivity rose 43 percent • The markets in the late 1920s stopped expanding • The distribution of wealth was also a problem (1 percent of the population owned about one-third of all personal property

  12. The Causes • Most Americans could not afford to buy products • Europeans still recovering from World War I could not afford American products • High tariffs made it difficult for European citizens to buy American goods

  13. The Depression Hits Home • Unemployment drove some Americans to theft • State and local governments and private charities raised money to help poor and unemployed Americans • Need was far greater than availability • Many people became angry with little federal government help

  14. The Depression Hits Home • Bonus Army—veterans who became upset with the government and wanted their World War I bonus • Herbert Hoover saw the Bonus Army as a dangerous mob and ordered federal troops to restore order

  15. The Depression Hits Home • Troops drove the veterans from their camps with bayonets and tear gas • The incident led many to criticize President Hoover

  16. President Hoover Fights Back • Hoover felt that relief and recovery should come largely through voluntary cooperation rather than federal efforts • Hoover did approve the Reconstruction Finance Corporation (RFC) that lent money to railroads, banks, and other businesses to keep them running ($1.5 billion in 1932)

  17. President Hoover Fights Back • Hoover failed to realize how serious the depression was • As the Depression war on, many felt the federal government should play a greater role in fixing the economy

  18. Focus Questions • What was the stock market like before the crash? • What were the major causes of the Great Depression, and how did it weaken the U.S. economy? • How did economic hard times affect Americans?

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