U.S History MP 3 Ms. Reed

Tuesday, January 19th Tuesday, January 26th What caused the Great Depression?

Economic Episodes Read the handout on the economic episodes of the Great Depression. As you read, complete the questions. These will need to be handed in when you are finished.

America: The Story of US - Bust As you watch the video, please answer the questions. These will be collected at the end of the class.

Wednesday, January 27th Thursday, January 28th Please hand in your signed MP 2 grade sheet. FYI, if you would like to find out your semester grade, follow this formula: (MP1 x 2) + (MP2 x 2) + Mid-Term / 5 = Semester

Course selection for Social Studies Please fill out the top part of the course selection sheet. Do not fill out the Teacher Recommended Social Studies Course section. Once this is completed, fill out #1 and #2. Hand this into the basket. I will look over this while you are working and we will conference. Once we have talked about a course, I will take the papers and make copies. You will take the originals to your course selection time with the counselors and I will hold onto a copy in your file.

Advanced Placement Courses 2015-2016 Course Selection Advanced Placement Courses Elective Options AP European History Mrs. Langton World History Mr. Tiberi/Mrs. Buchanan/Mrs. Shirey AP U.S History Mrs. Buchanan History of Conflict Mr. Howell AP World History Mrs. Shirey History of Human Rights Mrs. Reed AP Government & Politics Mrs. Moores Criminal Law & Procedure Mrs. Moores/Mr. Howell AP Economics Mr. Tiberi Psychology

Economic Concerns Pick up an “Economic Causes of the Great Depression Review” sheet from the front table. Use your economic episodes reading from the last class to answer the questions. Hand this in when you are finished. For the summary, summarize the causes of the Great Depression. You will have 20 minutes to complete.

Vocabulary Inflation A general upward movement in price of goods and services in an economy. Prices of individual goods and services rise (and fall) at different rates. Inflation and deflation measure the average or general tendency of price changes. The prices of some things may fall during periods of inflation even though the prices of the majority of goods and services are rising. During a period of inflation, if prices increase at a faster rate than people’s salaries or wages, people aren’t able to buy as many goods and services.

Vocabulary Deflation A general downward movement in the prices of goods and services in an economy. Although falling prices may seem appealing because people could buy more goods and services with their incomes than they could before, there are reasons to be concerned about deflation. Deflation is often accompanied by falling wages and increasing unemployment. Also, during periods of deflation, debtors have to repay their loans with dollars that are more valuable. So, in essence, debtors have borrowed cheap dollars and are repaying with dollars that will buy more. In addition, consumers and producers who are in debt may suffer; as their incomes drop; their loan payments may remain the same.

Vocabulary Unemployment Rate Represents the number of unemployed as a percentage of the labor force. Civilian, noninstitutional persons 16 years of age or older are classified as unemployed if they do not have jobs, have actively looked for work in the prior four weeks and are currently available for work.

Vocabulary Depression A period of severely declining economic activity spread across the economy (not limited to particular sectors or regions) normally visible in a decline in real GDP, real income, employment, industrial production, wholesale retail credit and the loss of overall confidence in the economy.

Vocabulary Bank Reserves The amount of deposits not loaned out by banks. A bank’s reserves can be calculated by subtracting a bank’s total loans from its total deposits. The United States, along with most of the rest of the world, has a fractional reserve banking system. This means that banks take in deposits and lend most of the money that they take in. The banks keep only a fraction of deposits on reserve. Ordinarily, this system works well, but it does depend on the willingness of people to hold bank deposits.

Vocabulary Bank Failures Bank Run Occur when banks are unable to meet depositors’ demand for their money. Throughout history, there have been episodes in which too many people have tried to take their money out of their banks at the same time and as a result, banks have failed or suspended operations. Regardless of whether a bank suspends operations for some time or it fails, customers lost confidence. Bank Run This occurs when many depositors run into a bank at the same time to get their money out. When a bank run begins at one bank and spreads to other banks, causing people to lose confidence in banks, it is called a bank panic. Bank panic cause more bank failures and the cycle continues.

Prosperity Hides Troubles Prosperity during the 1920s did not include all groups in society. Not all Americans were improving economically. The overall feeling after WWI was that ‘times were getting better’.

Prosperity During the 1920’s Consumer consumption increased Gross National Product (market value of the goods produced in 1 yr) increased Amount of trading on stock market increased President Hoover encouraged competition between businesses as well as voluntary cooperation between labor & management Had been responsible for managing Food Administration during WWI These were more obvious to the average American

Troubles in the 1920’s Farmers are hit the hardest: Expanded productivity to meet demands of WWI (bought more land, equipment, farmed more land) = huge debts Continued to produce @ WWI rates during the 1920s = overproduction = lower prices New equipment was more productive; had to make payments on debts (mortgages, loans, etc) Surpluses continued but there were no buyers Late 1920s – drought/weather/etc = lower production Results in overproduction Combined this resulted in rural depression Lack of cash = dependence on credit

Troubles Uneven distribution of wealth Industrial workers’ wages increased along with disposable income but wages couldn’t keep up with rising prices Were more productive=more goods to sell=more $$ for rich businessmen (1929-wealthiest 1% of population earned same amount as bottom 42%) 60% of Americans earned <$2000/year; wealthiest earned 50% more Wealthiest did not purchase 50% more of all consumer products Results in overproduction

Troubles Credit Business Cycle Credit was easier to get More Americans were making purchases on credit=increased debt Business Cycle 1920s had been the economic expansion portion of cycle Economic peak hit in 1929 Downturns always occur after a peak (not always clear why) & a recession or depression happens

Troubles Multiplier effect (multiple waves of spending) Reverse multiplier: when 1 person reduces spending that impacts the income of others 1929 – people lost jobs; stopped buying cars & homes = mild recession Mild recession = unemployment in affected industries = reduced spending overall Farmers have low productivity + high indebtedness Still believe to be temporary “Bank Runs” occurred where citizens tried to get their cash out of banks

Wall Street Stock prices increased because people ‘speculated’ (gambled) with $ they didn’t have, hoping to catch a winning stock Prices became unsteady throughout 1929 (normal) & confidence started to disappear & people started to sell October 24, 1929 (Black Tuesday) 16 million shares sold, mostly at great loss Billions of dollars lost Stocks lost value

Crash Course - Great Depression Stock Market Crashes Does not always mean a depression When investors expect prosperity=increasing prices & fast recovery Signals other problems in the economy are pulling it down Crash Course - Great Depression