Causes of the Great Depression

Question 1

How was income distributed across America

Answer 1

Northeast $921 and Far West $881 with the Southeast of America was much lower at $421

Question 2

What was the nature of employment

Answer 2

Employment was very unstable and most people worked for only a few months at a time

Question 3

How unstable were get rich-quick-schemes

Answer 3

Many Americans invested in speculative ventures which lost them money and the desire led to many confidence tricksters

Question 4

What were the effects of the Florida Land Boom

Answer 4

• Population 1920s 968,000, by 1925 it was 1.2 million
• Hurricane in 1926 left 150,000 homeless
• Many people bought land based on speculation and hadn’t even seen the plots beforehand

Question 5

What was the issue with stock-market speculation

Answer 5

• People began to invest in companies for their but based on speculation
• Easy credit meant people could buy stocks on the margin (meaning they weren’t bought for the full price) which lead to the creation of the bull market

Question 6

What were the weaknesses of the American Banking system

Answer 6

• It was outdated by the 1920’s
• Banks were regulated by themselves and often served the interest of bankers rather than the people
• Many peoples money was in small banks that were unable to cope with financial hardship

Question 7

What were the effects of the cycle of international debt

Answer 7

• America relied on Europe repaying it’s war debts

- Europe was not only too poor to repay its debts it could also not trade with America due to high tariffs

Question 8

What were the effects of overproductions and the slowdown of the American economy

Answer 8

• Small businesses began to fail: For every four businesses that succeeded, three failed
• Construction Industry: The construction industry began to slow down, leading to layoffs and knock on effects for other industries that relied on the construction industry
• Overproduction: By the end of 1929 many warehouses were filled with domestic goods that could not be sold due to low demand

Question 9

What happened during the downward spiral

Answer 9

• Full Time employment began to fall and the economy began to spiral downwards
• Fall in income led to demand falling, which led to a drop in production and employment
• Problems were concealed by superficial optimism and the frenzy of stock market speculations