Warm-up Write an argument explaining why the stock market crashed in 1929. Use insights you gained from our simulation.

The Stock Market Crash of 1929 Time.com

II. The Great Depression: Immediate Cause – the Stock Market Crash: Prices of stock rose throughout the 20s By Sept. 1929, the Dow Jones average reached 381 -Dow Jones – the price of stocks from 30 of the largest companies in the U.S.

II. The Great Depression: Thursday, October 24, 1929 – some stockholders began to pull out of the market – afraid of a crash Tuesday, October 29, 1929: -“Black Tuesday” -the day the stock market crashed -investors panicked and started selling before their stock became worthless -Dow Jones fell to 261 (41 in 1932) -between $6 and $9 billion was lost

Cause Unequal distribution of wealth: -people were very rich or very poor -20% of the nation lived in poverty (late 1920s) -over 70% of Americans had no savings and couldn’t afford consumer goods that were being produced

In 1929, $2,500 was considered by economists as the income necessary to support a family Wages are on the decline (EX: Mining (84.5 cents in 1923 to just 62.5 cents in 1929))

Trickle-down? Wealthy Americans tended to spend less on economy supporting goods and more on luxuries Wealth then becomes bottled-up Consequently, there is less demand to keep employment and investment high Economic transactions then slow down

Cause Buying on Margin: -the buyer pays a certain amount down, and then pays the rest in installments (payments) with interest -easy credit -some people created huge debts

Warmup (in notebook) What kinds of economic problems cause depressions? Why should people care about inequalities between the rich and the poor? What happens when the middle class shrinks? How did the 1929 stock bubble build up?

Cause Declining world trade after World War I. - European countries had to pay back war debts.

Cause Increase in unemployment: -new factory machinery required fewer workers High tariffs (tax on imports) on foreign goods: -decreased competition, which increased prices of certain goods

Causes Huge farm surpluses: -led to a drop in farm prices -many farmers lost their farms because no one needed their food

Effects People were poor Forced to sell businesses They had invested much of their money in the Stock market in hopes to make a lot of money quickly. Forced to sell businesses Cash in life savings This was done to prevent going bankrupt when they needed to pay the banks back.

Effects People quickly tried to find money to pay off their margin Banking crisis- banks had lost money in the stock market and customers could not pay back loans. -banks were poorly managed -people lost money (sometimes their life savings) when their bank closed -7,000 banks closed in the 1920s

Effects Great Depression- period of deep long-lasting economic recession during the late 1920’s early 1930’s.