Knowledge Connections

Definition

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TermVocabulary Recession Depression

Essential Question

What caused the worldwide depression?

How was the European economy after the war?

After the war, most nations were left owing huge amounts of money

Victory was not cheap…

Wartime spending was higher than any taxes or trade brought in

Defeated nations, like Germany, faced the extra burden of reparations to the Allies

How was the American economy after the war?

The US economy was much stronger than other nations

Why?

•No fighting had taken place on American soil

After the war, American factories were producing most of the world’s goods!

•The US had entered the war late and kept its costs low

How did the US help Europe after the war?

The US acted as the world’s bank by loaning money to other nations

To make a profit, the US needed European nations to repay their loans with interest….

The US was headed for trouble

That rarely happened!

What other factors weakened the US economy?

Buying on the MarginPeople bought stock and only paid for part of the

costs, the borrowed the rest from stockbrokers

Risk taking buyersSome buyers “gambled” on the

stock market in hopes of making a profit. Stock prices were built

up beyond their real value

What happened in October 1929?

Stock prices became so high, that less people could afford to buy stocks

With less investors, prices begin to drop

Nervous investors begin to sell as well

October 29, 1929 – The Stock Market “crashes”

How does that lead to a depression?

People begin taking money out of the bank to repay loans

Banks loan more money than they have

Without money, many banks are forced to close

At this time in history, when a bank closes, customers lose everything!!!

How did this depression affect the American people?

Cause:banks and factories closed

People lost their jobs People lost their homes

Banks took farms

Effect:

The Great Depression lasted more than a decade

How did this affect the world?

The rest of the world was having a hard enough time rebuilding after the war

The US tried to put tariffs on exported goods in order to gain money

The US could not afford to assist Europe like it had done before

As a result, European banks and business began to fail

Essential Question

What caused the worldwide depression?

Worldwide Depression Timeline