Essential Questions: - What caused the stock market crash of 1929? - What other factors brought about the Great Depression? The Root Causes of the Great Depression

The World Before Those with money were investing in the stock market “Roaring 20s!” Emergence of middle class Luxury goods markets Average Americans saw little to no change in income Society liberalizing Music, fashion, mores, women

The Great Depression % unemployment 50% for African-Americans Franklin Delano Roosevelt (D) elected in 1933 Begins New Deal Changes role of government Before, government believed its job was to support business After, government took an active role in the welfare (health) of its people Social Security Unemployment Later: medicaid, free reduced lunch

Stock Market When you buy stock you own a part of the company As company makes money, so do you Apple went from $7 to $700  Investors bought on margin  Borrowed money to buy stock  Could make major $$  Or lose badly! Dow Jones goes from 60 to 400 during 20’s Many put life savings into stock Most don’t do research

The Crash The bubble bursts on “Black Tuesday” October 29 th 1929  In part caused by declining home prices and values and real estate bubbles  Sound familiar? Eerie! Much of stock value is based on investor confidence If people don’t believe in it, value drops People began abandoning what they saw were sinking ships "We are broke. Last April I was worth $100,000. Today I am $24,000 in the red."

So what? How could a decline in the stock market affect average people? People who have savings in stock suddenly have none Consumer confidence drops Americans pull back on spending Less spending means businesses have to lay off people  People begin to pull money out of banks  Those banks run out of money  Average people lose their savings  People without money don’t buy stuff  More jobs lost

The Crash Leads To Depression  Over 9,000 banks fail during the 1930s  Bank Runs!  Savings and money wiped out  Trade drops  Smoot-Hawley Tariff  America tries to protect its industries  Buying power of average American drops  Industrial production down 50%  Ecological disaster  Farmers go bankrupt  Drought + prices  Unequal distribution of wealth  Rich lose, poor still losing  Banks unregulated  Make risks, and lose it all

GDP = C + I + E + G GDP stands for Gross Domestic Product Value of all goods and services created in a country C = Consumer spending I = Investment by industry (stuff made, purchased) E = Excess of exports over imports (you want more exports) G = Government spending Question: What would happen to GDP if G increased?

Herbert Hoover President Started amidst prosperity, left as a national shame Last Republican until 1952 Believed the market would correct the depression Core beliefs fundamentally different than what was needed Faith in the “invisible hand” During Hoover’s Presidency the Depression worsened drastically Little government intervention Government spending as part of GDP 1929: 11% 2010: 45% YearGDP in billions Unemployment rate Federal Spending in billions 1929$ %$ $ %$ $ %$ $ %$ $ %$4.6

Questions Causes of Great Depression 1. What factor of GDP do you think was most hurt by the stock market crash? 1. Why do you think so? 2. Using the GDP formula, how would you stimulate the economy? 3. Interpret the cartoon to the left. What is the message of the cartoonist? a) Do you think it is fair?

Exit Ticket (5-10 mins.): What caused the stock market crash of 1929? What other factors brought about the Great Depression?