The Economy During the Great Depression Q9fh4aTcOLg

The Long Bull Market The optimism that put Hoover in the White House drove stock prices to new highs The stock market was established as a system for buying and selling shares of companies

Long Bull Market Sometimes circumstances lead to a long period of rising stock prices – This is known as a bull market – In the late 1920s this convinces many Americans to invest heavily in stocks

Stocks As the market continued to grow many bought stocks on margin – Made only small cash down payments – As long as prices kept rising, buying on margin was safe If the stock began to fall, a broker would issue a margin call to protect the loan – Demanding the investor to repay the loan at once – Had to sell quickly or they might not be able to repay the loan

The Great Crash The bull market lasted only as long as investors put new money into it By late 1929, the market was running out of new customers Some professional investors began to sell their holdings – Prices slipped

The Great Crash October 29, 1929 – Black Tuesday- prices took the steepest dive yet By November $30 million dollars was lost News of bank failures spread and Americans began to make runs to the bank causing them to collapse – Takes place when depositors decide to withdraw their money at one time, usually in fear of collapse

Banks Weakened 1) many banks lent money to stock speculators 2) many banks had invested depositors’ money in the stock market hoping for higher returns than they would get from conventional loans Banks lost money on investments and speculators defaulted on their loans

Supply and Demand Supply- how much there is of something Demand- how much of something people want When demand is greater than supply, prices go _______. When supply is greater than demand, prices go _______.