Transcript The Economy of the 1920s

The Economy of the 1920s
The Economy of the 1920s
 Business in the 1920s
 GDP
 Consumerism
 Credit
 Stock Market 101
 Types of Investment
 Stocks
 Gross Domestic
Product (GDP): The
income and output for
a given countries
economy.

GDP = consumption +
investments +
government spending +
(exports-imports)
 Gross Domestic Product
(GDP): The income and
output for a given countries
economy.

GDP = consumption +
investments + government
spending + (exports-imports)
 Following World War I the
United States entered
recession.


Recession: A period of time in
which there is a decline in
economic trade and
prosperity.
Recession = 2 consecutive
quarters of falling Gross
Domestic Product
Where on this chart is there a Recession?
Check Up!
1. Define
GDP.
2. Where
on this
chart is
there a
Recessio
n?
The Economy of the 1920s
 Business in the 1920s
 GDP
 Consumerism
 Credit
 Stock Market 101
 Types of Investment
 Stocks
The Economy Recovers
 By 1922 the economy
recovered and grew
until 1928
 Production of
Consumer Goods
increased rapidly
 Consumer goods are
things that typically have
a short life span (last less
than 3 years)

They are goods not used to
make other goods.
The Economy of the 1920s
 Business in the 1920s
 GDP
 Consumerism
 Credit
 Stock Market 101
 Types of Investment
 Stocks
A Credit Economy
 Americans turned to Credit to buy consumer
goods.

Credit: An arrangement by which a buyer can take
possession of something now and pay for it later or over
time.
A Credit Economy
 Americans turned to Credit to buy consumer
goods.
Credit: An arrangement by which a buyer can take
possession of something now and pay for it later or over
time.
 Credit was used in the purchases of up to 90% of major
durable goods by the end of the 1920s


Durable goods are products that have an extended life, such as a
refrigerator, couch, washing machine, radio
The Economy of the 1920s
 Business in the 1920s
 GDP
 Consumerism
 Credit
 Stock Market 101
 Types of Investment
 Stocks
Investments
 Investment: An item that
is purchased with the
hope that it will generate
income or increase in
value in the future.
Types of Investments
 Investment: An item that
is purchased with the
hope that it will generate
income or increase in
value in the future.
 Types of Investment




Bonds: A loan to a
government or business
that is paid back over time
plus interest.
Property: Purchase of
home, land or real estate
with the purpose of later
selling for a profit.
Commodities: Food, energy
or metals.
Stock: Purchasing a share
of ownership of a company.
Check Up!
 List the 4 main types of
Investments people
make.
The Economy of the 1920s
 Business in the 1920s
 GDP
 Consumerism
 Credit
 Stock Market 101
 Types of Investment
 Stocks
Stocks
 Corporation: A business
that is owned by multiple
people
 Examples of
Corporations: Facebook,
McDonalds, Apple,
Walmart, General
Electric, Ford Motors
Stocks
 Corporation: A business
that is owned by multiple
people
 Stock/Share = Partial
ownership of a company
 Examples of
Corporations: Facebook,
McDonalds, Apple,
Walmart, General
Electric, Ford Motors
Check Up!
 List the 4 main types of
Investments people
make.
 What is a corporation?
 What is a stock/share?
What’s the benefit of owning a share?
 Dividends


Some corp. pay quarterly
dividends.
Dividends: payments of
corp. profits paid out per
share.
What’s the benefit of owning a share?
 Dividends


Some corp. pay quarterly
dividends.
Dividends: payments of
corp. profits paid out per
share.
 Increased Value

A stocks price reflects the long-term
earnings potential of a company.
 Investors are attracted to stocks
of companies they expect will
earn profits in the future;
because many people wish to buy
stocks of such companies, prices
of these stocks tend to rise.
 Investors are reluctant to
purchase stocks of companies
that face bleak earnings
prospects; because fewer people
wish to buy and more wish to sell
these stocks, prices fall.
How is Price Determined?
 A stock's price is a report of the price at which a trade was made. For
each stock, there is a bid (the amount a buyer is ready to pay) and an
asking price (the amount a seller is willing to take). Whenever an
investor accepts either price, a trade occurs. The price at which the
trade occurs becomes the stock's new price.
Check Up!
 List the 4 main types of
Investments people
make.
 What is a corporation?
 What is a stock/share?
 What are the benefits
and dangers of owning
shares in a company?
Ways People often Invest
 Savings – Using personal
wealth to invest
 Retirement funds –
401k, Roth IRAs,
Pension Funds
 Buying on Margin–
Using borrowed money
to invest.
Margin Buying
 During the late 1920s
stock prices soared
because of margin buying.

As long as prices continue to
rise the margin buyer can
then sell their shares, pay
back the broker (the person
who gave them the loan) and
keep the difference.
Check Up!
 List the 4 main types of




Investments people
make.
What is a corporation?
What is a stock/share?
What are the benefits
and dangers of owning
shares in a company?
What is the danger of
“buying on margins?”

http://economics.about.com/od/stocksandmarkets/a/stock_prices.htm
 http://www.ehow.com/about_4676915_how-price-stock-determined.html

http://en.wikipedia.org/wiki/Gross_domestic_product
 http://etext.virginia.edu/journals/EH/EH37/Murphy.html