Chapter 8- The Great Depression Essential Question- How did the collapse of the economy impact the United States?

I- The Stock Market Crash A) The Stock Market (Wall Street) 1) Buy shares of a company 2) If the company does well, the stock price goes up. You can sell the stock for a profit or hold onto it and hope for more gains

3) If the company does poorly the stock price goes down a) You can sell it at a loss or hold onto it and hope it gets better (could get worse)

B) Bad Investments 1) During the 1920’s, many people began speculating on stocks a) Speculation- investing or buying without sound (good) business principals or practices

2) Many investors also bought stock ON MARGIN a) On Margin- using borrowed money to buy stocks

3) In 1929, stock prices had risen 400% over five years. a) In the end of 1929, investors stopped buying stocks (due to high prices and fear)

D) The Crash 1) Banks begin to call in their margins (want their loaned out money back) 2) No one could sell their stocks (no buyers) 3) No buyers= no money= no way to pay margins

4) Oct 29,1929 Investors desperately try to unload stocks. Investors begin to panic. 5) No one is buying any stocks? 6) Stock prices fall drastically

E) Many companies go instantly bankrupt. 1) Many banks collapse due to no payment on loans 2) Stocks become worthless pieces of paper