Topic: Economics and the Great Depression Essential Question: What are the basic principles of economics?

 Capitalism  Also called a market economy or a free-enterprise system  Adam Smith of Scotland  Father of capitalism  Three natural laws of economics:  Law of self-interest

 Three natural laws of economics:  Law of self-interest  Law of supply and demand  Supply  The amount of a good that businesses are willing to offer for sale  Demand  The amount of a good that people are willing and able to buy

 Demand  The amount of a good that people are willing and able to buy  Law of competition

 The amount of a good that people are willing and able to buy  Law of competition  Role of government:  Laissez-faire  Government should not interfere with business  Government should  Protect property rights  Enforce contracts  Allow free trade

 Discuss  Adam Smith  Self-interest  Supply and demand  Competition  Role of government  Write a sentence describing how one of the following affects prices:  Supply and demand  Competition  Enforce contracts  Allow free trade

 Enforce contracts  Allow free trade  Other important principles:  Scarcity  Exists because of unlimited human wants and needs in a world with limited resources

 Scarcity  Exists because of unlimited human wants and needs in a world with limited resources  Opportunity cost  Exists because of scarcity  What you give up for your economic choices

 Exists because of scarcity  What you give up for your economic choices  Financial Planning  Credit  Allows you to buy now and pay later  Problems with using credit:  Debt  Interest

 Debt  Interest  Some types of credit:  Credit card  Auto loan  Mortgage  Student loan

MMortgage SStudent loan IInvestment PPutting up money in the hope of gaining a profit later SSome types of personal investments: SSavings account

 Some types of personal investments:  Savings account  Stocks  Shares of ownership in a company  Mutual funds  Spread investments across many companies  Example of diversification

 Discuss  Scarcity  Opportunity cost  Credit  Investment  Write a sentence describing an example of an opportunity cost  Spread investments across many companies  Example of diversification

 Spread investments across many companies  Example of diversification  The Great Depression ( )  Causes:  Natural business cycles

CCauses: NNatural business cycles HHigh tariffs reduced international trade BBad investments LLed to Black Tuesday: the stock market crash

 Bad investments  Led to Black Tuesday: the stock market crash  The Dust Bowl ( )  Severe dust storms on the prairies

TThe Dust Bowl ( ) SSevere dust storms on the prairies RResponses to the Depression PPresident Herbert Hoover LLaissez-faire HHomeless moved to “Hoovervilles”

 Laissez-faire  Homeless moved to “Hoovervilles”  President Franklin D. Roosevelt  The New Deal  Three goals (the three Rs):  Relief  Recovery  Reform

 Recovery  Reform  Sometimes called “Alphabet Soup”

 Reform  Sometimes called “Alphabet Soup”  The Depression ended because of World War II

 Discuss  Causes of the Great Depression  Responses to the Great Depression  Write a sentence comparing/contrasting Hoover’s and FDR’s responses to the Great Depression  Sometimes called “Alphabet Soup”  The Depression ended because of World War II