1. American History Chapter 15: Crash and Depression
I. The Stock Market Crash

2. Objectives
Learn about events that led to the stock market’s Great Crash in 1929.
See how the Great Crash produced a ripple effect throughout the nation’s economy.
Become familiar with the main causes of the Great Depression.

3. Bell Ringer
What would happen if you went to your bank and asked to withdraw money from your savings account and were told that there is no money.
What might cause that situation?
What options would you have?
What do you know about the Great Depression. (page 508)

4. A) The Market Crashes
Dow Jones Industrial Average: an average of stock prices of major industries
September 3rd all time high – 381 /8018
Stock prices were higher than what they were worth
Black Thursday – Oct 24 – dropped 21 points in last hour GE 400 – 283
Black Tuesday: Oct 29th – record number of stocks sold the great crash
Great Crash: collapse of the stock market – 30 billion in losses
Business cycle: the periodic growth and contraction of a nation’s economy

5. B) The Ripple Effect of the Crash
At first only investors hurt – did trickle down
Risky loans hurt banks – with the crash the business lost could not repay
Consumer borrowing – people borrowed to buy things – loans recalled
Bank runs – people rushed to get money out of banks – called in loans – business that were hurt couldn’t pay
Bank failures – banks that couldn’t pay went broke
Savings wiped out – when banks went so did savings
Cuts in production – can’t borrow to expand, nobody had money to buy anyway
Rise in unemployment
Further cuts in production – unemployment grew and incomes shrank – consumers spent less and business produced less

6. Economic Contraction – decline marked by falling output of goods and services – long one is called a depression
Great Depression: most severe economic downturn in the nation’s history
Factories closed – small business next – farm prices fell – 1932 – 25% of work force unemployed – GNP dropped in half
World nations interdependent – US quit investing in Germany – Germany suspended reparation payments – Alias quit repaying war loans to US

7. C) Underlying Causes of the Depression
An unstable economy – most money in the hands of few rich – not consumers/ industry produced more than could be bought/ Farmers and workers not getting money
Over speculation – people bought stocks and used those stocks as collateral to buy more – money is all borrowed, not there
Government polices – the FED did not lower interest rates after crash to increase money supply

8. Review What events led to the stock market’s Great Crash in 1929.
Why did the Great Crash produce a ripple effect throughout the nation’s economy?
What were the main causes of the Great Depression?