Presentation on theme: "The Great Depression Depression"— Presentation transcript:
1The Great Depression 1929-1941 Depression - an economy with high unemployment, falling income, failing business, decline in production and sales.The Great Depression- An extreme economic slump in America in the 1930s
5SOLUTION? Installment Plan – buy now, pay later. After WWI, there was an increased demand for goods but in actual fact people could not afford to buy all of the goods they wanted.SOLUTION? Installment Plan – buy now, pay later.
6The uneven distribution of wealth didn’t stop the poor and middle class from wanting to possess luxury items, such as cars and radios…
7By the end of the 1920s, 60% of the cars and 80% of the radios were bought on installment credit.
8Once the economy began to slow down, and people started losing their jobs, they were not able pay off their debts.
92. Income GapConsumers lacked sufficient income to purchase goods; farmers’ income fell.Workers’ income failed to keep pace with prices. Wages were as little as 20 – 25 cents per hour!Even the best employer Ford Motor Company paid only $5.00/Day for a 6AM-6PM shift!
11Question 1: How much did a bushel of wheat cost in 1925?1932? How might this graph explain why farmers were hit so hard during the Great Depression?
123. Overproduction of Goods High demand for goods created increase in production.During WWI farmers and businesses produced excess of goods. After the war the demand for goods fell.This led to overproduction, people weren’t buying, businesses lost money, laid off workers and eventually went out of business.
164. Global Depression World trade declined in the 1920s. European countries had massive war debts to payEuropean consumers were not able to buy American goods.American industries were stuck with surplus goods.
175. Stock Market CrashJust as one could buy goods on credit, it was easy to borrow money to invest in the stock market; This was called “margin investing” (or “buying on margin.”)
18Small investors were more eager to invest in the Stock Market in large numbers because the “margin requirement” was only 10%.
19This meant that you would buy $1,000 worth of stock with only 10% down, or $ People leapt at the chance to invest in business!
20How did the Stock Market Crash? October 29th, 1929“Black Tuesday”Confidence in stock market failedInvestors began selling stocksMargin calls- Banks wanted their money from brokers, and brokers wanted their money from investors.Neither was able to pay and the stock market crashed.March 1928 – Stock prices soared and the number of shares traded rose sharplyPeople rush to investStock prices were 400 percent higherInvestors became cautious, stop investingFewer buyers drove prices down
21Great CrashQuestion 3: What was the average stock value in 1929? 1932?What can you infer from the information in this graph?
22Why did the market crash? Many people bought stocks on margin—like a loanCompanies lied about their profits — No regulationRepublican Presidents in the 1920s believed in laissez faire—no control on businessesStock market was not regulated by government
23With the loss of confidence in stocks, people began to lose confidence in the security of their money being held in banks. Customers raced to their banks to withdraw their savings.
246. Bank FailuresBanks made unsound loans; bank failures resulted when the loans could not be repaid.25% of the Banks in the US closedBank Runs and banks closing their doorsled to peoplelosing theirlife savings.
27BOOM/PROSPERITY/PEAK 7. Business CycleRegular ups and downs in the economy.The economy naturally goes through ups and downs ( Boom and Bust periods )BOOM/PROSPERITY/PEAKHIGH DEMAND – Leads to - MORE PRODUCTION which leads to HIGHER EMPLOYMENT and MORE DEMAND but it eventually produces INFLATION
28Business Cycle SLOWDOWN/Bust INFLATION/OVERPRODUCTION Leads to LESS PRODUCTION = LAY OFFS = LESS SPENDING = LOWER CONFIDENCE = LESS INVESTMENT = HIGHER UNEMPLOYMENT UNTIL SURPLUSES ARE USED UP and the economy recovers
29So the economy in a free enterprise goes through economic prosperity, recessions and depressions as a result of a regular business cycle.