GREAT DEPRESSION

Great Depression

• The Great Depression was a time period between 1929 and 1940 in which there was high unemployment and little economic growth.

Measurements

• Gross Domestic Product: GDP Total value of all goods and services produced in a country in one year. This is a sign of economic strength.

• Unemployment Rate: Percentage of the labor force that is unemployed but actively seeking work.

• Inflation: An increase in the supply of money that results in higher prices.

Lack of Consumer Demand

• Demand: The amount of a particular good or service the population will buy at a given price.

• Supply: The amount of a good or service available at a certain price.

• Deflation: A general drop in prices caused by low demand.

Lack of Consumer Demand

• How It Caused the Great Depression: Due to deflation and lower prices, businesses began to lose money and lay off workers. This caused people to stop buying goods.

Tight Money Policy

• Monetary Policy: Policy that controls the supply and value of a nation’s currency.

• Federal Reserve: This institution manages the nation’s set monetary policy for the United States.

• Interest Rates: This is the cost of borrowing money, usually it’s a percentage of the amount borrowed.

• Tight Money: A monetary policy of slowing down lending to curb inflation.

Tight Money Policy

• How It Caused the Great Depression: The Federal Reserve raised interest rates which made borrowing money more expensive and difficult.

High Tariffs

• Tariff: A tax on imported goods used to encourage people to buy domestic goods because foreign goods are more expensive.

• Trade War: This occurs when nations put tariffs on each others goods slowing down trade.

High Tariffs

• How it Caused the Great Depression: The Smoot Hawley Tariff set tariffs on foreign goods. Other nations responded by putting tariffs on US goods.

Bank Failures

• Bank System: Banks take deposits from customers and use that money to give loans to other customers.

• Credit: A system where a buyer borrows money and agrees to pay it back later, usually with interest.

• Bank Run: When people fear the bank closing they demand all their money at once. This can cause banks to fail.

Bank Failures

• How This Caused the Great Depression: When people lost confidence in their banks, bank runs occurred. When banks went bankrupt people’s savings were wiped out.

Stock Market Crash

• Stock: A stock is a share in the ownership of a corporation. A stock market is where these shares are bought and sold.

• Dow Jones: This is a measure of stock prices.• Buying on Margin: This is when you borrow

money to buy stocks. Some people borrowed as much as 90% of the money they used to buy stock.

Stock Market Crash

• Speculation: People bought stocks at artificially high prices hoping to get rich.

• Black Tuesday: On October 29th 1929, the Dow Jones Industrial Average dropped dramatically causing a widespread panic.

• Effect: While the stock market did not cause the Depression, it was a sign of the economy’s weaknesses.