 The day that many view the Great Depression starting was Black Tuesday.  Black Tuesday: October 29,  This was the day that the stock market crashed.

 The price of stock dropped a lot.  Many people wanted to sell their shares, but no one wanted to buy them.  To make matters worse, many people bought stocks on credit.

 This meant that people lost their entire fortunes all at once.  When people tried to withdraw their savings from banks, the banks did not have the funds to pay their customers.  They quickly went bankrupt.

 During the 1920s, the stock market boomed.  People made their fortunes in the stock market.  Many people thought that they could make a profit investing in successful companies.

 Bull market: a steady rise in stock prices over a long period of time.  People thought that high stock prices today would even be higher tomorrow, and so on.  Soon, people would invest their entire savings and borrowed money to invest in stocks.

 Buying on margin: buying stock on credit.  People bought stock from a broker, a person who was licensed to sell stock.  People would put 10% down and borrow the other 90%.

 Example: Someone would put down $1,000, and borrow $9,000.  Then, that person could buy $10,000 worth of stock.  It was also a lot easier to borrow money back in the 1920s than it is today.

 Because of this, people would make risky investments to try to make huge profits.  Eventually, it all came crashing down, since the stock market was all driven on speculation and borrowed money.

 The stock market shifted from a bull market to a bear market.  Bear market: prices decrease steadily.  People panicked and sold their stocks.  By the end of 1929, investors had lost $30 billion.

 Banks at this time began to make bad investments.  Even during the good times of the roaring 20s, banks still closed at the rate of 2 per day.  By 1933, 20% of banks in the U.S. closed.  People saw their savings vanish!

 We’re going to do a bank run.  Bank run: people line up around the block to get their money out of a bank.  The first ones in line get their money.  Once the bank runs out of money, the bank closes.  You’ll be given a dollar amount, and you will attempt to get your money out of the bank.  Good luck!

 What happened?  Write the following down in a writing prompt:  Were you able to get your money?  How much were you able to get, and what will you do with it?  If you were not able to get your money, what will you do now?  How do you think this exercise made people feel during the Great Depression?

 Overproduction: when companies make too much of a product for its consumer base.  Companies increased production in the roaring 20s because it increased income.  People were spending a lot of money then.

 Overproduction began to cripple the economy.  As a result, companies began to produce less.  This meant that companies began to lay off workers, since fewer workers were needed.

 Underconsumption: means that people were not buying as much as the economy was producing.  Since people were being laid off from work, people spent less on goods and services.

 Underconsumption hit farms very hard.  Produce was ruined before it ever got to market.  Farms went out of business.  Then, it began to hit other businesses. Many of them closed.

 In 1929, the unemployment rate was only 3%.  After Black Tuesday hit, that all changed.  By 1933, the unemployment rate in America soared to 25%.  We are around 9% unemployment right now.

 Many economists blame the government for weakening the economy in 1930 and  The Federal Reserve System is responsible for managing the nation’s money supply.

 The Federal Reserve, or “Fed”, is mainly known for raising and lowering interest rates at federal banks.  In bad times, the Federal Reserve usually lowers the interest rate to entice businesses to borrow money.

 Instead, the Fed chose to RAISE interest rates to decrease the amount of money moving through the economy.  Result: businesses couldn’t afford the loans they needed to survive.

 As a result, businesses couldn’t afford to keep workers.  People stopped spending money.  Less money went into the economy.

 HSTA: raised taxes on foreign goods to protect American businesses.  However, it backfired badly.  Other countries raised taxes on U.S. goods, which meant that no one would buy our stuff.

 Crippled our economy and affected other economies around the world.  The Great Depression was not just a U.S. problem…it was worldwide.

 Opinion:  Using the knowledge that you have, decide which factor was the greatest in leading the United States into the Great Depression, and what you would have done differently if you had the power.  Write a two paragraph essay as a response.  It will be graded.