Chapter 25 - The Great Depression and the New Deal

Question 1

List the Three Causes of the Great Depression.

Answer 1

1) The Stock Market Crash
2) Structural Weakness in the U.S. Economy
3) International Aggravators.

Question 2

What happened to stock values during the economic boom?

Answer 2

They became untied from their actual value and massively inflated.

Question 3

What caused stock prices to drop on Black Thursday?

Answer 3

Investors tried to sell their hopelessly overvalued stocks and slashed prices massively to get people to buy them.

Question 4

How were stocks bought that further contributed to the Stock Market Crash?

Answer 4

On credit. 10 % paid the other 90% borrowed.

Question 5

What were the consequences of the Stock Market Crash?

Answer 5

1) Upper Class - Wiped Out Their Entire Fortunes
2) Middle Class - Wiped Out Their Life Savings
3) Most Americans Were not Wealthy Enough to Purchase Stocks So It Didn’t Directly Effect Them.
4) Removed Investment Capital From The Economy.

Question 6

List the Structural Weaknesses in the American Economy.

Answer 6

1) Less Than Robust Consumer Purchasing Power. 18 Million Families Earned Less Than $1500 annually.
2) Underconsumption - People Didn’t Have the Money to Buy all the Goods Being Produced.
3) Worsening Economic Conditions For Farmers - Overproduction due to technological advances severely destroyed profit. 2/3’s of farms operated at a loss.

Question 7

List the International Factors that Caused the Depression.

Answer 7

1) Post World War I International Debt Problems - Created a Circle of Payments Through the Dawes and Young Plans. One weak link and the. entire system would collapse. Germans spent US money on non-profit items
2) Bank Failures in the US and Western Europe - Depositors Lost All Their Money When Banks Failed (No FDIC)
3) Trade Barriers - The Smoot Hawley Tariff
4) No Lender of Last Resort - No Country to Bail Out Others With Short Term Loans. The US was the lender of last resort.

Question 8

How was the Depression exported to Europe?

Answer 8

A lack of American funds meant no money went to Germany and Austria. No money for Germany and Austria meant no repayments. No repayments meant Austrian central bank closure. Closure meant Western Europe Grinding to a Halt.

Question 9

How did the US and other nations avoid total collapse?

Answer 9

A departure from the Gold Standard.

Question 10

List the conditions faced in American During the Depression.

Answer 10

1) High Unemployment - 35-50% during the GD
2) Psychological Crisis - People couldn’t provide for themselves and that fostered a sense of guilt and shame.
3) Manufacturing Production - Cut in Half
4) Farm Income - Cut in Half; Over One Million Farmers Lost Their Farms
5) Personal Income - Fell 50%
6) Banks - 40% of them closed (10,000).
7) Stock Market - Lost 40% of its value.
8) Private Breadlines for Crucial Food

Question 11

How did Americans Respond?

Answer 11

1) Escapism through Hollywood (Shirley Temple, Marx Brothers, Disney)
2) Leftist Politics of Socialism and Communism.

Question 12

When did the U.S. economy hit rock bottom?

Answer 12

1932-1933

Question 13

When did some recover occur?

Answer 13

1933-1937

Question 14

What happened in 1937-1938?

Answer 14

A Relapse occurred that erased the recovery from 1933-1937.

Question 15

How did the Hoover Administration initially respond tot he Great Depression?

Answer 15

They did nothing.

Question 16

What actions did the Hoover Administration take to attempt to alleviate the Depression?

Answer 16

1) The Smoot-Hawley Tariff
2) Broke With Laizze Faire Tradition and Had Companies Maintain Levels of Production
3) Subsidized Significant Public Works Programs
4) A One Year Moratorium on Payments from Germany and Britain was Issued
5) The Reconstruction Finance Corporation Gave Home Loans and the Like

Question 17

What type of action did Hoover oppose?

Answer 17

Direct federal unemployment relief measures.

Question 18

What were the six key themes of the New Deal?

Answer 18

1) Convince the American People the the Government is Doing Something to Solve the Depression.
2) Try to Give Something to Everyone. (Marked the Embrace of Interest Group Politics)
3) Use the Government to Solve Economic Problems. Go Beyond Small Measures of the Progressives, Desperate Times Call For Desperate Measures
4) Be Pragmatic - The Ends Justify the Means
5) Adopt a Super-Loose Reading of the Constitution. Legislate First and Let SCOTUS sort it all out later.
6) Experiment With Keynesian Economics and Deficit Spending. (Demand Side or Trickle Up Economics.)

Question 19

List the Three Primary Features of the New Deal

Answer 19

1) Relief Measures Aimed At Alleviating the Immediate Suffering Caused By Unemployment.
2) Recovery Measures to Restore Health to the Economy
3) Reform Legislation to Render the American political and economic system more just and humane.

Question 20

Provide Examples of New Deal Relief Measures.

Answer 20

1) The Civilian Conservation Corps
2) Federal Emergency Relief Act Funds For States to Spend on Infrastructure
3) Civil Works Administration - Highways and Schools
4) The Public Works Administration - Built the Lincoln Tunnel and Chicago’s Subway System
5) the Works Progress Administration - Built 500k miles of roads, 100k bridges, 100k public buildings, 600 airports. Had Theater and Art Projects as well.
6) The National Youth Administration Provided Jobs For College Students
7) Helped Farmers and Homeowners Refinance Their Mortgages to Avoid Foreclosure.

Question 21

Provide Examples of Recovery Measures.

Answer 21

1) The National Industrial Recovery Act/The National Recovery Administration - Legal Right to Engage in Cartel Like Behavior and Halt Anti-Monopoly Prosecutions. Right to Form Unions
2) the National Labor Relations Board - Designed to Adjudicated labor grievances.
3) Agricultural Adjustment Act - Tried to raise Prices By Imposing Voluntary production Cutbacks
4) Moving From the Gold Standard.

Question 22

Provide Examples of Reform Measures.

Answer 22

1) The Securities and Exchange Commission - to Regulate Stocks and Bonds and End Margin Buying
2) The FDIC to insure deposits in private banks
3) The TVA- to construct and run a public utility as a government.
4) The Social Security Act as a Pension for Retired Americans
5) PWA Public Housing Projects - Created 50 Developments Designed for the Middle Class NotThe Poor.

Question 23

What Caused FDR to lose popularity?

Answer 23

1) His Court Packing Plan

2) SCOTUS ruled against New Deal Initiatives 7 out of 9 times.

Question 24

What helped FRD get re-elected in 1940?

Answer 24

WWII

Question 25

What did the New Deal Accomplish?

Answer 25

1) Evicerated the Appeal of Radical/Extremist Politics
2) Maybe Slightly Ameliorated the Depression.
3) Maintained American Confidence in the Political System
4) Absorbed Fringe Movements to Prevent Extreme Idealogical Surges.

Question 26

What were the Impacts of the New Deal on the United States?

Answer 26

1) It Redefined the Democratic and Republican Parties.
2) Aided the Growth of Big Government in America
3) Legitimized Keynesian Economics
4) The Reconfiguration of the American Political System into Localized Factions
5) The Locus of Power Shifted From Wall Street to Washington

Question 27

What did the Two Parties Stand for and Remain as?

Answer 27

Republicans - party of Businessmen, Bankers, Wealthy and the Elite
Democrats - Liberals, Poor, Blacks, Reformers, Journalists, Women, Labor Unions, City Dwellers

Question 28

How extensively did government grow under the New Deal?

Answer 28

1) One Million People Were Employed By The Federal Government
2) Not Many People (5%) Paid Actual Income Taxes
3) Greater regulatory Environment