1. Problems w/ the Banking Industry
“Bank Runs”

2. “The Great Crash” (1) Interest rates were low throughout the 1920’s
Three long-term causes:
(1) Interest rates were low throughout the 1920’s
(2) “Buying on the margin” or
borrowing to invest
“The butcher, the baker, and the candlestick maker” … all were invested in the marketplace
(3) Over-valued stocks &
“the bubble”

3. “The Great Crash” “Black Tuesday,” Oct. 29, 1929
Panic in Selling of stocks
Weakens Economy in Two Ways:
Banks invested in the stock market, lost $$$$
(2) Weakens credit …

4. Causes of the Great Depression
(1) Uneven distribution of
wealth (drop in consumer spending)
Leads to
(2) Falling Demand
(3) Overproduction
- Leads to
(6) High tariffs
(4) Low interest rates
Leads to
(5) Stock market speculation
Deflation
Unemployment

5. Hoover vs. Hitler’s Response to the Depression
What do you notice in the chart?

6. (1). The causes of the Dust Bowl include all of the following _________________.
A. Farmers over-plowed the Great Plains, hoping for increased profits
B. Warm weather and drought conditions loosen the top soil
C. Crop prices dropped, so farmers let their fields go fallow
D. Answer “A,” “B,” and “C” are correct
E. Answer “A” and “B” are correct

7. Dust Bowl
- “Black Sunday,” April 14, 1935 …
- Causes of the storms

8. (2). Overproduction in farm products and consumer goods, such as refrigerators, cars, radios, etc. eventually led to deflation because _________________.
A. When there was too much supply the prices of goods fell
B. After the prices of goods were reduced, owners produced more goods
C. After the prices of goods were reduced, owners fired workers to reduce costs
D. The farm and business products created during the 1920’s were not valuable, which is why the prices of those goods dropped
E. Answers “A” and “B” are correct
F. Answers “A” and “C” are correct
G. Answers “B” and “D” are correct

9. Deflation

10. (3). A major problem during the Great Depression was pervasive nation-wide deflation, which can best be explained as _________________.
A. An increase in prices
B. A decrease in the value of the dollar
C. A drop in consumer spending
D. A decrease in the amount of goods
E. The reduction in prices, wages, and the overall economy

11. (4). In the summer of 1919, race riots occur in many major cities in the North because _____________.
A. The Great Migration occurred, that is, more than 500,000 African Americans moved out of the South during WWI to the Northeast and Midwest in search of better jobs and opportunities
B. Soldiers that had fought in WWI, largely white American males, returned to their home cities and towns now looking for jobs, and combined with the African Americans that had moved to many Northern cities during the war, this created tense race relations
C. African Americans had protested in many Northern cities desiring the right to vote, which only further intensified race relations

12. (5). The 1920’s were economically prosperous for many reasons, including the new employer practice of “welfare capitalism,” which referred to _____________.
A. Increasing the wages of employees, while also reducing the number of hours worked
B. A workplace environment in which the employees were not required to belong to a union
C. Offering workers the opportunity to buy stock, participate in profit sharing, and receive medical benefits and pensions

13. (6). The best explanation of the Dawes Plan is the following: ________________.
A. German banks provided loans to the government of Austria-Hungary, so it could pay off Serbia for all of the damage during WWI
B. American banks provided loans to the government of Germany, so it could pay off France and Great Britain, as compensation for damage during WWI and then Great Britain and France used this money to pay back the United States
C. This was a plan to cancel all WWI debts, because Senator Henry Dawes believed the massive WWI debts would eventually lead to another world war

14. (7). The best explanation of the Teapot Dome Scandal is the following: ________________.
A. Charles Forbes, the Secretary of Veterans Affairs, sold hospital supplies from VA Hospitals around the country and he kept the profits in his teapot
B. Harry Daugherty, the Attorney General, received bribes from other countries and businesses for favorable treatment by the United States
C. Albert Fall, the Secretary of the Interior, secretly sold oil allocated for the U.S. Navy’s strategic reserve in Wyoming as a result made almost ½ a million dollars from the sales

15. (8). By 1927, Americans purchased 75% of household goods on credit
(8). By 1927, Americans purchased 75% of household goods on credit. The best explanation for this is the following: ________________.
A. Americans purchased good on the installment plan, putting down only a small amount of the total cost of the good and then making monthly payments
B. Because of the uneven distribution wealth, the middle class did not have enough income to purchase goods with cash, leading to underconsumption in the economy
C. The wealthy were greedy, as they have always been since the beginning of time

16. Income Inequality Today
By 1929, the wealthiest 1% earned the same amount of money as the bottom 42% of the economy.

17. (9). During the 1920’s, farmers made up __________ % of the American workforce.
B. 1/10
C. 1/2
D. 1/4

18. (10). The Republicans Party, led by presidents Warren Harding and Calvin Coolidge during much of the 1920’s, displayed confidence due to __________ all increasing during the majority of the decade.
A. Unemployment, bankruptcies, and consumer spending
B. Consumer consumption, stock market values, and the economy in general
C. Foreclosures of farms, consumer debt, and the economy in general

19. Economic Problems in Europe and Political Responses
Economic Problems in Europe and Political Responses ** Various forms of Keynesian Economics … ** Cutting taxes, increased govt. spending … ** Responses of U.S.S.R., France, and Great Britain …

20. Keynesian Economics
Recessions can be caused a drop in aggregate demand.
Definition: governments should engage in “short-term deficit spending, generating economic growth.”

21. Causes that Supported Failure of “Weimar Republic (1918-1933)” and Rise of Hitler
Economic Instability

22. Hyperinflation

23. Hyperinflation

24. Economic Instability
The Weimar Republic has a difficult time paying the war loan, so it prints more money, too much money.
The German “Mark” and the Dollar, 1914 – 1923
Date Exchange rate, $1 = ___ Marks
July, marks
January,
January,
July,
January,
January, ,972.0
August, ,620,455.0
September, ,860,000.0
November, ,200,000,000,000.0 marks

25. “Dawes Plan”
United States
France & Great Britain
Germany

26. How does Hitler become Dictator of Germany?
January of 1933, Hitler is named Chancellor
Feb. 27, 1933, burning of the Reichstag, legislative building
Enabling Act of 1933, Hitler becomes dictator
“From each according to his ability,
to each according to his need”
Karl Marx, Communist Manifesto

27. Germany Responds Economically to the Depression…
1933 – Germany begins the “Autobahn”
1934 – Hitler initiates build-up of military

28. Hoover Responds to the Great Depression
Conventional economic thought …
Hoover Dam (1931 – ‘36) benefits …
Water supply
Hydro-electric power
Flood control
Reconstruction Finance Corporation (1932) …
$2 Billion to banks, companies, railroads, etc.
Emergency Relief Act (1932) …
$$$ to states for public works projects

29. Hoover Responds to the Great Depression
By 1932, unemployment is at 24% …
Bonus Army (1932) …
40,000 war veterans want their promised bonus
U.S. Army evicts veterans from Washington D.C.