Causes of the Great Depression

Causes of the Depression 1. During WWI, Farmers purchased more land and machinery, but after the war... Farmers are having trouble making a living. 2. Uneven Distribution of Wealth: In the 1920’s Rich get WAY richer and many workers get poorer. 60% of American families earned under $2000/year

Causes of the Depression People get carried away with easy credit. They play the stock market with a “get rich quick” attitude. a. a. Speculation: making high-risk investments in hopes of big returns. b. b. Buying on margin: investors could purchase a stock for only a fraction of its price and borrow the balance The Stock Market Crash. Oct. 29 th, 1929 (Black Tuesday)- The bottom falls out of the market as everyone sells and no one buys. The Great Depression starts ( )

Economic Effects of the Depression Risky loans hurt banks (businesses unable to repay loans) Consumer borrowing (Banks call for loans and consumers cannot repay) Bank Runs Bank Failures (Have to close and do so without returning depositor’s $)

1. 1. Savings are wiped out (many lose everything) Cuts in production (business can’t borrow $ to produce goods and people can’t afford to buy them) Rise in unemployment Further cuts in business create less products (consumers spend less so businesses create less product) Economic Effects of the Depression