How did the Great Depression occur?

Bell Work Question What do you think caused the Great Depression? Explain.

What caused the Great Depression? Review – Underlying Cause, Symptom and Spark Underlying Cause – Most important cause of a problem Symptom – Events that occur because of the problem Spark – Immediate cause

What caused the Great Depression? Underlying cause of the Great Depression: The American economy of the 1920s is unbalanced. While this did not necessarily have to lead to a depression, the elements were already there.

What caused the Great Depression? Symptoms 1: Buying stocks on margin. Investors who lacked money to buy stocks bought stocks on margin. This meant they paid only a fraction of the stock price and borrowed the rest from the banks.

What caused the Great Depression? Symptoms 1: Buying stocks on margin, continued… As long as the value of the stocks continued to rise, the buyer could later pay back what he had borrowed when he sold and make a profit. If the value fell, investors and brokers would not have enough cash to pay off the loans.

What caused the Great Depression? Symptom 2: Installment buying of consumer goods / credit crisis. Borrowed money fueled much of the economy of the 1920s. Defaulting on loan payments led to major banking problems.

What caused the Great Depression? Symptom 3: Industry declines in the 1920s, leading to a decline in spending. In the months before the crash, the car and construction industries suffered from a decrease in orders. As a result, employers cut wages and fired workers.

What caused the Great Depression? Symptom 3: Industry declines in the 1920s, leading to a decline in spending, continued… With their income slashed, many Americans could no longer afford the consumer goods that the nation’s industries had been churning out.

What caused the Great Depression? Symptom 4: International depression. European nations had to repay WWI debts to the U.S. after World War I. Loans to foreign countries from U.S. banks dried up. This meant other nations had less money to spend.

What caused the Great Depression? Spark: 13 million shares are traded by panicked brokers on October 24, 1929. This leads to the crash of the stock market on Tuesday, October 29, 1929.