What really caused the Great Depression? Warm UP: What is a budget? What is it used for? What are the pros and cons? spoiler alert...LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

role play... -eight small groups -roles are farmers, teachers, construction workers, railroad workers -budget worksheet and one calculator per group, also budget scenario cards -READ the directions at the top of the page and complete columns on the budget sheet for when you’re done, the budget card should be read. Then complete the columns for 1933 and answer the questions LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Spokesperson *Tell worker’s income in 1928, read the worker’s 1933 card, discuss the family’s budget changes *Handout 3.1, Discuss in groups: -In 1933, when your income decreased, why did the percentage of your income spent on housing and perhaps other items increase? -Did you spend the same dollar amount on forr in 1928 as you did in 1933? -What tradeoffs did you make in order to feed yourself and/or your family? What did you have to give up? -How would these spending decisions affect the economy? -you retained your job, but 25% didn’t have one. What effect did this have on spending? -If you were unemployed, what choices might you have had to make? -If you had additional family members come to live with you in 1933, what happened to the income per person, per capita income, for your family? LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

during the Great Depression *The country experienced deflation, prices decreased by nearly 30% *At first this seems good, but then businesses get less revenue, * So then they fire people because they can’t afford to pay them...so unemployment was 25% and wages fell *because the people had less money, they bought less...borrowers couldn’t repay loans, banks failed… BAD CYCLE! LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Quick Review *What are some of the theories that have been advanced over the years regarding the cause of the Great Depression? *What were the negative impacts of the stock market crash? *What problems did the Smoot-Hawley Tariff of 1930 cause? *What does being on the gold standard mean? *What explanation regarding the cause of the Great Depression has stood the test of time? *What was the main reason that explains why the money stock fell during the Great Depression? LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Bank Reserves *in the budget activity, people had lost their savings because banks in the community failed. *Banks take in deposits. Bank reserves=deposits not loaned out *US has fractional reserve banking...only keep a fraction of deposits on reserve *People who borrow, use the money *Because only a fraction of deposits are kept on reserve, NOT EVERYONE CAN GET ALL $ OUT ON SAME DAY LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Time Travel: free trip today welcome to the 1930s -You are living in a community with three banks -get your card, get your money, bankers come to the front -bankers will be in business as soon as the rest of you do what your cards say Discuss LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Second Federal Bank Fails! *this means the bank ran out of cash and can’t honor withdrawal requests. -How much did banker have in reserve at beginning? *Who wanted to or did withdraw? Come on up- total how much the group withdrew or wanted to- -How do you feel about your money if you have money in the Third State and First Community Bank? What are you going to do? LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

WITHDRAW!!!! -people were withdrawing money! more than the bank has in reserves! *Who had loans from Second Federal that you weren’t able to pay? How much were they? *Second banker: What would have been different if they had made their payments? LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Bank Failures -occur when banks can’t meet demands for withdrawals -banks then fail or suspend operations -either way, customers lose confidence -if customers all make a “bank run,” then they all take it out, if it spreads to other banks it becomes a panic, and then it can cause more failures... LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Money supply/stock -amount of money available, -people remove money from bank: money supply shrinks -then people are able to borrow less -people buy less -businesses sell less -prices go down, revenues go down -unable to employ workers or pay less -workers buy less and can’t repay loans -more banks fail, supply of money and credit shrinks... LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Discussion -What is a bank failure? -What is a bank run? -What is a bank panic? -How did bank panics contribute to the collapse of the nation’s banking system and a reduction in the money stock? LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Closure -hold some books- Bank of the US Fails Stock Market Crash in 1929 Smoot-Hawley Tariff of 1930-Protectionist Policies Outflow of Gold from US Banking Bank Panics and Suspensions LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Assessment Do it -the last card is missing- write a concluding statement for the broadcast. LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2

Simile... -Groups, chart paper, quote… *Identify how a bank panic is like a brush fire. -DRAW a diagram illustrating your group’s ideas and appoint a spokesperson to explain the description LT: I can describe the impact of a collapsing US banking system in causing the Great Depression. DOK: 1-3; S. 2