1. Find a partner and pick up one of the handouts from the front of the room. You only need one handout per pair.
Today is going to be AWESOME!!! I have a really good feeling… 
YeeHaw Game!

2. Causes of the Great Depression
Today’s LEQ: What caused the most severe economic crisis in American history?

3. Purpose of stock market is to provide businesses with money to expand
Stock market was booming in the 1920s; result was a bull market
Stock Market Crash

4. Bull Market

5. Many thought there was no limit to how high the bull market could go
People put their savings in stock and even borrowed money to invest! This is called buying on the margin.
For example, a buyer may pay 10% of stock’s price and borrow the other 90% from a stock broker.
Stock Market Crash

6. Easy borrowing encouraged speculation – making risky investments in hopes of earning large profits.
Hoped to make big money really quickly
Artificially drove up stock prices
Stock Market Crash

7. Stock market peaked in September 1929 then started to fall – created a bear market
HUGE drop on Black Tuesday in October 1929! Fearful of losing everything, investors rushed to sell their stocks, pushing prices even lower
Stock Market Crash

8. Bear Market

9. As prices fell, stockbrokers demanded loans be repaid; investors could not make enough selling their stocks to repay their loans.
Many sold their homes, cars, etc. to pay their debts
Even businesses affected – those companies that invested their profits went bankrupt
Stock Market Crash was a key cause but not the only cause… bY
Stock Market Crash

11. Banking Crisis Stock Market Crash triggered banking crisis
In the 1920s, banks loaned money to stockbrokers, who in turn loaned that money to individual investors…
Bad loans piled up and depositors lost confidence in their local banks
Resulted in bank runs
Once bank ran out of cash, it closed its doors. Millions saw their savings vanish.
Banking Crisis

13. Too Much for Sale, Too Little to Spend
By 1920, most American factories used assembly line method of mass production. Output per worker increased 32% by 1929!
Resulted in overproduction – more products created than people could afford to buy How would you graph this?
Widening gap between rich and poor; For a time, many Americans used credit to buy cars, radios, etc.
Too Much for Sale, Too Little to Spend

14. Too Much for Sale, Too Little to Spend
By 1929, buying spree was over
Many were deep in debt
Even the rich bought less because they already owned everything they needed
Economy was showing signs of underconsumption – people not buying as much as economy was producing
How would you graph this?
Too Much for Sale, Too Little to Spend

15. Farm Failures, Bankruptcies, and Layoffs
Farmers first to feel the pain
Troubles started after WWI; American farmers supplied food for soldiers and war-torn Europe; after WWI, consumption decreased and prices dropped.
How would you graph this?
Problems of underconsumption spread to industry
Production declined by 38% by end of 1930; many businesses went bankrupt
Many workers found themselves unemployed (from 3% in 1929 to 25% in 1933)
Vicious downward spiral had started - truly DEPRESSING situation…
Farm Failures, Bankruptcies, and Layoffs

16. Could the Great Depression have been avoided???
The BIG Question…

17. RAFT Assignment Role: Economic Advisor
Audience: President Hoover, Congress, and the Chairman of the Federal Reserve
Format: Speech
Topic: Explain to President Hoover, Congress, and the Fed why their actions thus far have been counteractive in preventing a Great Depression. Convince them to follow your recommendations and be sure to discuss both fiscal policy and monetary policy.
RAFT Assignment