Transcript U_S MP 3 15-16 Website

Ms. Reed
What caused the Great Depression?
 Read
the handout on the economic episodes
of the Great Depression. As you read,
complete the questions. These will need to
be handed in when you are finished.
As you watch the video, please answer the
questions.
These will be collected at the end of the class.
Please hand in your signed MP 2 grade sheet.
FYI, if you would like to find out your semester
grade, follow this formula:
(MP1 x 2) + (MP2 x 2) + Mid-Term / 5 =
Semester
 Please
fill out the top part of the course
selection sheet. Do not fill out the Teacher
Recommended Social Studies Course section.
 Once this is completed, fill out #1 and #2.
Hand this into the basket. I will look over
this while you are working and we will
conference.
 Once we have talked about a course, I will
take the papers and make copies. You will
take the originals to your course selection
time with the counselors and I will hold onto
a copy in your file.
Advanced Placement Courses
Elective Options
AP European History
Mrs. Langton
World History
Mr. Tiberi/Mrs. Buchanan/Mrs.
Shirey
AP U.S History
Mrs. Buchanan
History of Conflict
Mr. Howell
AP World History
Mrs. Shirey
History of Human Rights
Mrs. Reed
AP Government & Politics
Mrs. Moores
Criminal Law & Procedure
Mrs. Moores/Mr. Howell
AP Economics
Mr. Tiberi
Psychology
Mr. Howell
Pick up an “Economic Causes of
the Great Depression Review”
sheet from the front table. Use
your economic episodes reading
from the last class to answer the
questions. Hand this in when
you are finished. For the
summary, summarize the causes
of the Great Depression. You
will have 20 minutes to
complete.
 Inflation

A general upward movement in price of goods
and services in an economy.


Prices of individual goods and services rise (and fall) at
different rates. Inflation and deflation measure the
average or general tendency of price changes. The
prices of some things may fall during periods of
inflation even though the prices of the majority of
goods and services are rising.
During a period of inflation, if prices increase at a
faster rate than people’s salaries or wages, people
aren’t able to buy as many goods and services.
 Deflation

A general downward movement in the prices of
goods and services in an economy.


Although falling prices may seem appealing because
people could buy more goods and services with their
incomes than they could before, there are reasons to
be concerned about deflation.
Deflation is often accompanied by falling wages and
increasing unemployment. Also, during periods of
deflation, debtors have to repay their loans with
dollars that are more valuable. So, in essence,
debtors have borrowed cheap dollars and are repaying
with dollars that will buy more. In addition,
consumers and producers who are in debt may suffer;
as their incomes drop; their loan payments may
remain the same.
 Unemployment

Rate
Represents the number of unemployed as a
percentage of the labor force. Civilian,
noninstitutional persons 16 years of age or older
are classified as unemployed if they do not have
jobs, have actively looked for work in the prior
four weeks and are currently available for work.
 Depression

A period of severely declining economic activity
spread across the economy (not limited to
particular sectors or regions) normally visible in a
decline in real GDP, real income, employment,
industrial production, wholesale retail credit and
the loss of overall confidence in the economy.
 Bank

Reserves
The amount of deposits not loaned out by banks.
A bank’s reserves can be calculated by
subtracting a bank’s total loans from its total
deposits.

The United States, along with most of the rest of the
world, has a fractional reserve banking system. This
means that banks take in deposits and lend most of
the money that they take in. The banks keep only a
fraction of deposits on reserve. Ordinarily, this system
works well, but it does depend on the willingness of
people to hold bank deposits.

Bank Failures

Occur when banks are unable to meet depositors’
demand for their money.


Throughout history, there have been episodes in which
too many people have tried to take their money out of
their banks at the same time and as a result, banks have
failed or suspended operations. Regardless of whether a
bank suspends operations for some time or it fails,
customers lost confidence.
Bank Run

This occurs when many depositors run into a bank at
the same time to get their money out.

When a bank run begins at one bank and spreads to other
banks, causing people to lose confidence in banks, it is
called a bank panic. Bank panic cause more bank failures
and the cycle continues.
 Prosperity
during the 1920s did not include
all groups in society.
 Not all Americans were improving
economically.
 The overall feeling after WWI was that ‘times
were getting better’.
 Consumer
consumption increased
 Gross National Product (market value of the
goods produced in 1 yr) increased
 Amount of trading on stock market increased
 President Hoover encouraged competition
between businesses as well as voluntary
cooperation between labor & management

Had been responsible for managing Food
Administration during WWI
 These
were more obvious to the average
American

Farmers are hit the hardest:
Expanded productivity to meet demands of WWI
(bought more land, equipment, farmed more land) =
huge debts
 Continued to produce @ WWI rates during the 1920s =
overproduction = lower prices


New equipment was more productive; had to make
payments on debts (mortgages, loans, etc)
Surpluses continued but there were no buyers
 Late 1920s – drought/weather/etc = lower production

Results in overproduction
 Combined this resulted in rural depression


Lack of cash = dependence on credit
 Uneven

Industrial workers’ wages increased along with
disposable income but wages couldn’t keep up
with rising prices


Were more productive=more goods to sell=more $$ for
rich businessmen (1929-wealthiest 1% of population
earned same amount as bottom 42%)
60% of Americans earned <$2000/year;
wealthiest earned 50% more


distribution of wealth
Wealthiest did not purchase 50% more of all consumer
products
Results in overproduction
 Credit


Credit was easier to get
More Americans were making purchases on
credit=increased debt
 Business

1920s had been the economic expansion portion
of cycle


Cycle
Economic peak hit in 1929
Downturns always occur after a peak (not always
clear why) & a recession or depression happens
 Multiplier
effect (multiple waves of
spending)

Reverse multiplier: when 1 person reduces
spending that impacts the income of others



1929 – people lost jobs; stopped buying cars & homes =
mild recession
Mild recession = unemployment in affected industries =
reduced spending overall
Farmers have low productivity + high indebtedness
 Still
believe to be temporary
 “Bank Runs” occurred where citizens tried to
get their cash out of banks
 Stock
prices increased because people
‘speculated’ (gambled) with $ they didn’t
have, hoping to catch a winning stock

Prices became unsteady throughout 1929
(normal) & confidence started to disappear &
people started to sell
 October



24, 1929 (Black Tuesday)
16 million shares sold, mostly at great loss
Billions of dollars lost
Stocks lost value
 Does
not always mean a depression
 When investors expect prosperity=increasing
prices & fast recovery
 Signals other problems in the economy are
pulling it down
Crash Course - Great Depression