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Depression Causes
| Question | Answer |
|---|---|
| What was happening with stock prices in the 20s? | rising steadily |
| What happened to stock buying between 1928-1929? | 1) everyone started speculating (investing in stocks) 2) perfect way to gamble/make money |
| How did people buy stocks | 1) "buying on margin" - ppl would borrow huge amounts of money from stockbrokers to buy stocks 2) stockbroker's would lend up to 75% of a stock's purchase price |
| Why did so many ppl buy stocks? | 1) gov's easy credit policies made it so anyone could get a loan to buy stocks 2) greed and optimism |
| What was going on with industries as speculation (stock buying) grew? | 1) agriculture, mining, & textile industries weakened 2) car production & construction industry slowed down |
| What did the Federal Reserve do in 1928? | 1) want to decrease speculation 2) increase interest rate on fed. reserve notes 3) warn banks not to lend money for stock market speculation |
| Effect of Federal Reserve increasing interest rate in 1928? | 1) speculators willing to pay higher interest to buy more stock, and banks lend them even more money 2) In September, Federal Reserve raises interest rates again |
| Black Thursday | 1) 10/24/1929 2) stock prices drop a lot, some are worth nothing 3) ppl start to panic, crowd outside NY Stock Exchange 4) NY bankers buy $30 million worth of stocks to ease panic 5) stock prices continue to drop |
| Black Tuesday | 1) 10/29/1929 - Stock Market Crashes, Starts Depression 2) 16 million stocks traded at low prices 3) Hoover lies and says the economy is fine 4) over $30 billion lost in stocks |
| Structural Causes of Great Depression (1920-1929) | 1) increase in production and corporate profits but not worker's wages 2) overproduction, ppl stop buying as much as decade progresses 3) decline in farm prices 4) railroads, steel, mining lagging behind technologically, couldn't get investments |
| Collapse of Banking System | Federal Reserve failed to assure an adequate money supply that would have enabled the economy to bounce back from the shock of the crash |
| Global Economic crisis as a result of WW1 | 1) massive debt payments 2) trade imbalance with US |
| European economies collapse (1931) | 1) Austria bank fails 2) GB abandons Gold Standard 3) US exports decrease |
| Smoot-Hawley Tariff (1930) | 1) purpose is to protect farmers from foreign competition 2) raised tariffs on foreign imports so people would buy farm products made in the US 3) Euro countries respond by also raising their tariffs 4) trade decreases, spreading Depression worldwide |
Created by:
kayla57575
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