22.1: The Nation’s Sick Economy OBJECTIVE: Understand the causes of the Great Depression.

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22.1: The Nation’s Sick Economy OBJECTIVE: Understand the causes of the Great Depression

QUIZ 1.Who ran for the presidency for the democrats in 1928? 2.Who won the election of 1928? 3.What was “Black Tuesday”? 4.A “barometer of the Stock Market’s Performance is the ___________ Average. 5.Making a small down payment for a stock and borrowing the rest is called__________

Economic Troubles Brewing Big industries (steel, textiles, railroads) not making profits Diminishing demand for new products and new construction Agricultural business withering Congress passes price supports for farmers Pres. Coolidge vetoes price supports twice, 1927 & 1928 HOW ARE THESE BUSINESS CHANGES RELATED TO WWI?

Innovation EX: Ford’s Assembly Line Increased Production Advertising Increased Consumption Increased Credit Increased Profits THE MASS- CONSUMPTION ECONOMY =BAD HABITS

CONSUMER’S BAD HABITS Americans are buying less. Why? Business are producing more. Why? Americans use credit more. Why? OUTCOME: The gap between rich and poor was rapidly spreading. FACT: In % of US controlled nearly a third of its wealth, while 40% of US only has 10% of its wealth.

ELECTION OF 1928 CANDIDATES: Al Smith runs for Democrats Herbert Hoover runs for Republicans ISSUES: Smith’s Catholicism, opposition to prohibition, and connections to NYC VERSUS the apparent prosperity under Republicans OUTCOME: Hoover wins handily.

STOCK MARKET CRASH CAUSES Buying on margin Speculation EFFECTS Black Tuesday (10/29/29) Run on banks Great Depression

BEGINNING OF THE GREAT DEPRESSION CAUSESEFFECTS Old and decaying industrial base A crisis in the farm sector The availability of instant credit An unequal distribution of income Hawley –Smoot Tariff Buying on margin Falling demand for consumer goods Gross Nat. Product cut in half!!! Unemployment rises to 25%!!! Interests rates fall, people borrow $ and fall into deeper debt Collapse of investment and banks Global Depression

Unemployment, in millions

Bank Failures, in thousands

Business Failures, in thousands

STOCK MARKET CRASH STOCK MARKET CRASH