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The Great Depression Chapter 5 Lesson 20 TCAP Coach
The Great Depression The Great Depression was a ten- year period of economic hardship. It affected nations throughout the world. No one factor led to the Great Depression. Rather, many trends combined to cause the economic disaster that began in 1929.
From Boom to Bust During the 1920’s, the economies of Europe were trying to recover from World War I. But the US economy boomed, and many people invested money in the stock market.
From Boom to Bust In the 1920’s, people bought many things on credit. The economy was strong and businesses were confidents. So they readily lent money to people. Stores gave customers credit to encourage buying. Banks also made many loans during the 1920’s.
From Boom to Bust People borrowed money for cars, homes, and other large purchases. As a result, very few people had savings. Almost everyone had debt. Debt is money that is owed.
From Boom to Bust Many people even used credit to buy stocks. As a result, most of the money in the stock market was really just credit, not real money. On October 18, 1929, the value of stocks began to drop. By October 29, 1929, stocks had lost almost half of their value.
From Boom to Bust People did not have the money to pay back the loans they had used in buying the stocks. The day became known as Black Tuesday. The crash of the stock market did not cause the Great Depression. In fact, both were caused by many of the same problems.
Hard Times By 1933, 1 in every 4 workers in the US was unemployed, or did not have a job. Few people had money or credit to buy things. Prices for consumer goods kept dropping. This drop is called deflation.
Hard Times People also could not pay back their loans to banks. When loans were not paid back, the banks did not have enough money. Also, banks had invested in the stock market, just as people had. When the stock market crashed, the banks lost a lot of money.
Hard Times People began to worry about their savings. Bank runs became frequent. People would try to withdraw all their money form one bank at the same time. This led to the collapse of the banking system in 1932. The country was experiencing an economic bust.
Business Failures and Employment Big companies use loans to keep their businesses going. With the collapse of the banking system, companies could not get loans. Big companies such as General Motors (GM) could not make the same number of cars than before. Also, there were not as many people who could afford to buy cars. The number of GM cars dropped by more than half.
Business Failures and Employment Big companies also had to cut the number of their employees. The unemployment rate rose. The unemployment rate is the percentage of people who want to work but who cannot find jobs. In 1933, 15 million people, more than 25% of the people who wanted to work, were unemployed.
Business Failures and Employment With no money, people could not afford to buy housing. As a result, shantytowns were common. Shantytowns were places where thousands of people lived in shacks. Many Americans blamed Herbert Hoover, who was president from 1929 to 1933, for the Great Depression. They called the shantytowns Hoovervilles.
The Dust Bowl Farmers also suffered because the Great Depression. In the 1930’s, Midwest farmlands suffered a terrible economic and environmental disaster. First, crop prices had dropped. Farmers had over-planted crops to make more money. However, farmers didn’t use soil conservation.
The Dust Bowl The soil was vulnerable to erosion, or wearing away, from wind. Second, there was a drought, which means it did not rain, and land was very dry. The topsoil, or first layer of soil, dried up and blew away. Huge dust storms blew across the Midwest.
The Dust Bowl Farmlands were destroyed. In some places, so much dust fell that homes were buried up to their roofs. This disaster became known as the Dust Bowl. Farmers could not pay back money they had borrowed from banks, any many lost their land.
Rural Migration Many farmers who were ruined by the Dust Bowl set off for the West on a road called Route 66. Many were from Oklahoma. These people were called the Okies. There were not enough jobs in the West for all the Okies. When they reached California, most were unable to find jobs.
Rural Migration Many people in the South were also without jobs. Some went north to work in factories. Many people moved to Detroit to work in car factories. This migration, or movement of people from one area to another, changed America forever.
Rural Migration Before the migration, America was made up mostly of farmers and people living in small towns. Today, that figure is about 20 percent. Almost 80 percent of Americans today live in or near cities.
The New Deal In 1932, Franklin D. Roosevelt was elected president. Roosevelt said he had a “new deal” for the American people. Before Roosevelt was elected, the federal government had not helped the people or the economy very much.
The New Deal Roosevelt’s New Deal changed all that. The New Deal was a series of government programs designed to help the country. The New Deal helped America through the Great Depression. The program also boosted Americans’ confidence in the Govt. Many of Roosevelt’s program are still in effect.
The New Deal By 1940, conditions in the US had improved. In 1941, the US entered WWII. Suddenly, the government needed huge amounts of weapons, planes, tanks, and other war materials. By 1944, there were so many jobs available that the unemployment rate and dropped to 1 percent.
1. Why did the stock market crash and the banking crisis occur? A. The economy was doing well B. World War II began C. People had bought too much on credit D. Unemployment was high