1. The Great Depression Preview Main Idea / Reading Focus
The U.S. Economy in the 1920s
Quick Facts: Causes of the 1929 Stock Market Crash
The Depression Spreads
The Worldwide Depression
Quick Facts: Social Programs in Selected Countries

2. The Great Depression Main Idea Reading Focus
In the late 1920s, an economic depression started in the United States and quickly spread around the globe, causing great hardship and creating ideal conditions for political unrest.
Reading Focus
What happened to the U.S. economy during the 1920s?
How did the Depression spread throughout the United States?
How did the Depression affect the world?

3. The U.S. Economy in the 1920s At War’s End Economic Growth
U.S. world’s leading economic power at end of World War I
Position stronger during 1920s
End of decade, economy crashed
Economic Growth
American farms, factories supplied world with food, supplies to fight World War I
Economy slowed briefly at war’s end
Steady Growth
Economy booming by 1921
Most growth in industry
Auto manufacturing, consumer goods, radios, vacuum cleaners, washing machines
1920s Stock Market
Overall value rose 400 percent
Americans did not want to miss out on prosperity
Increased investment drove stock prices higher

4. Hidden Problems Credit
Stock market booming, but hidden problems affected economy
New wealth not distributed evenly
Richest 1 percent of population earned 19 percent of nation’s income
Easy credit allowed increase in consumer goods spending
Credit
Credit, arrangement where purchaser borrows money from lender and agrees to pay it back over time
At decade’s end many consumers reached limit of credit
Could no longer afford to buy products that had kept U.S. economy expanding

5. The Stock Market Crash Fall of 1929 October 29 Market Crash
Consumer spending slowed, sales suffered
Many feared drop in stock prices
Nervous investors began to sell off stocks
October 29
Black Tuesday, 16 million shares of stock sold in one single day
Few people wanted to buy stock, stock prices collapsed
Investors who had borrowed to buy stocks forced to sell at loss
Market Crash
Stock market crash ruined many investors
Banks that had lent money to investors were also in deep financial trouble
Devastating blow dealt to American industry

7. What happened to the U.S. economy during the 1920s?
Sequence
What happened to the U.S. economy during the 1920s?
Answer(s): The economy boomed; Americans bought goods and stock on credit; when consumer spending slowed, a stock sell-off began, resulting in the 1929 stock market crash.

8. The Depression Spreads
American economy took severe downward dive after stock market crash
Economic downturn became known as Great Depression
Depression result of complex factors
One factor, slowdown in industry; began before crash, worsened quickly after
Great Depression
As industry slowed, workers lost jobs
One out of four unemployed by 1933
Joblessness, poverty reduced ability to buy food, goods, hurt industry even further
Banks suffered when businesses, investors failed to pay off loans; many failed
Industry Slows

9. The Depression Spreads
Government Response
President Herbert Hoover favored minimal government response to crisis
Some thought depression was normal adjustment to overheated economy
Hoover eventually took some actions, many felt too little too late
Roosevelt Elected
Franklin Delano Roosevelt elected president, 1932
Increased federal government’s role in lives of Americans
Pushed forward New Deal, program to fight Great Depression
New Deal
Provided government spending to help start economic recovery
Public works programs to provide jobs, government money for welfare, relief
New regulations to reform, protect stock market, banking system

10. New Economic Theories
Increased government spending supported by theories of British economist John Maynard Keynes
Believed governments could limit, prevent economic downturns
Governments should spend money
Spending would help increase economic output
Factories would hire workers to meet new demand
Eventually workers would begin spending, depression would end
Government spending did help U.S. economy, but depression lingered through 1930s

11. Identify Cause and Effect
Explain the factors that led to the Great Depression.
Answer(s): unequal distribution of wealth; buying stock and products on credit; spending slowed; stock market crashed; a slowdown in industry followed

12. The Worldwide Depression
In 1929 America was one of the world’s leading importers and lenders of money, and created much of the world’s industrial output. Events affecting America’s economy would soon impact other countries.
Some countries having difficulties before stock market crash
European countries recovering from World War I
Allied Powers in debt to U.S.
Before the Crash
High interest rates in Great Britain
Decreased spending, high unemployment
Germany’s reparations led to inflation, crippled economy
World Woes
Japan’s economic depression forced banks to close
U.S. Great Depression latest in long series of economic crises
Effects far worse
Series of Crises

13. The Worldwide Depression
A Slowdown in Trade
President Hoover signed Smoot-Hawley Tariff Act, 1930
Act placed heavy taxes on imported goods
Attempt to encourage Americans to buy U.S. made goods, products
American goods would be cheaper than taxed imported goods
New tariff led other countries to increase their tariffs on American goods
World trade slowed to a standstill
Loss of foreign trade crippled many nations’ economies
Act Backfired
Trade slowed, prices collapsed
Price of Japanese silk dropped
Silk major Japanese export, nearly 20 percent of farm income
Decline of silk industry one example of collapsing markets worldwide
Results

14. The Worldwide Depression
The postwar era left many countries politically unstable. As the Depression continued, unrest grew worse.
Instability in Great Britain and France led to formation of several new governments
Extremist political groups gained strength
Germany’s Nazi Party blamed Jews
Italian dictator Benito Mussolini tightened his control of the nation
Political Impact
Widespread misery, hopelessness worldwide
Ideal conditions for rise of leaders who promised to restore their nations to glory
World in midst of troubled times
Worse crisis lay ahead
Economies Worsen,
New Leaders Emerge

15. How did the Depression spread to the rest of the world?
Summarize
How did the Depression spread to the rest of the world?
Answer(s): World trade slowed, ruining some foreign economies. War recovery and economic problems in Europe led to political unrest and changes in government.