GREAT DEPRESSION

Great Depression The Great Depression was a time period between 1929 and 1940 in which there was high unemployment and little economic growth.

Measurements Gross Domestic Product: GDP Total value of all goods and services produced in a country in one year. This is a sign of economic strength. Unemployment Rate: Percentage of the labor force that is unemployed but actively seeking work. Inflation: An increase in the supply of money that results in higher prices.

Lack of Consumer Demand Demand: The amount of a particular good or service the population will buy at a given price. Supply: The amount of a good or service available at a certain price. Deflation: A general drop in prices caused by low demand.

Lack of Consumer Demand How It Caused the Great Depression: Due to deflation and lower prices, businesses began to lose money and lay off workers. This caused people to stop buying goods.

Tight Money Policy Monetary Policy: Policy that controls the supply and value of a nation’s currency. Federal Reserve: This institution manages the nation’s set monetary policy for the United States. Interest Rates: This is the cost of borrowing money, usually it’s a percentage of the amount borrowed. Tight Money: A monetary policy of slowing down lending to curb inflation.

Tight Money Policy How It Caused the Great Depression: The Federal Reserve raised interest rates which made borrowing money more expensive and difficult.

High Tariffs Tariff: A tax on imported goods used to encourage people to buy domestic goods because foreign goods are more expensive. Trade War: This occurs when nations put tariffs on each others goods slowing down trade.

High Tariffs How it Caused the Great Depression: The Smoot Hawley Tariff set tariffs on foreign goods. Other nations responded by putting tariffs on US goods.

Bank Failures Bank System: Banks take deposits from customers and use that money to give loans to other customers. Credit: A system where a buyer borrows money and agrees to pay it back later, usually with interest. Bank Run: When people fear the bank closing they demand all their money at once. This can cause banks to fail.

Bank Failures How This Caused the Great Depression: When people lost confidence in their banks, bank runs occurred. When banks went bankrupt people’s savings were wiped out.

Stock Market Crash Stock: A stock is a share in the ownership of a corporation. A stock market is where these shares are bought and sold. Dow Jones: This is a measure of stock prices. Buying on Margin: This is when you borrow money to buy stocks. Some people borrowed as much as 90% of the money they used to buy stock.

Stock Market Crash Speculation: People bought stocks at artificially high prices hoping to get rich. Black Tuesday: On October 29 th 1929, the Dow Jones Industrial Average dropped dramatically causing a widespread panic. Effect: While the stock market did not cause the Depression, it was a sign of the economy’s weaknesses.