Chapter 4 Great Depression

Question 1

Great Crash of 1929

Answer 1

Stock market crash after speculation, leading to bubble. Stock market lost over 50% of its value in a week.

Question 2

Black Tuesday

Answer 2

Oct 29 1929, stock market sees highest volume of trading and loses 40% of it value in a day.

Question 3

Evictions in early 1930’s

Answer 3

Over 200,000 evictions in New York city alone, causing widespread protests.

Question 4

Bank run

Answer 4

People panic and try to remove their money from the banks at the same time, causing even healthy banks to fail. E.g. Bank of United States failed in early 1931 in New York, wiping out its depositor’s saving. Eventually over 5000 banks collapse with their depositor’s savings.

Question 5

Great Depression income

Answer 5

Income on average drops 40% between 1929-1932

Question 6

Hooverville

Answer 6

Slum of unemployed people. Named sarcastically after President Hoover.

Question 7

John Meynard Keynes

Answer 7

Creates the idea that governments should spend money to re-start the economy by increasing demand during an economic downturn. Becomes popular during the Great Depression.

Question 8

Laissez Faire

Answer 8

The idea that the government should not interfere in the economy, especially by giving welfare or support to the poor and unemployed.

Question 9

Smoot–Hawley Tariff Act

Answer 9

In 1930, the US passes a large increase in tariffs (import taxes) in an attempt to boost domestic industry. They reach the 2nd highest level in US history. Higher prices mean less demand, making the Depression worse.

Because of this and other countries retaliatory tariffs US trade drops by over 60%. US exports were worth $5.2
billion in 1929 but had dropped to $1.1 billion by 1932.

Question 10

Balanced budget efforts in 1930

Answer 10

As tax revenue drops, the government cuts spending to prevent having to borrow money. This further reduces demand, deepening the Depression.

Question 11

Pump priming

Answer 11

Government spends money to boost demand during a recession.

Question 12

Federal Home Loan Bank Act

Answer 12

In 1932 Hoover gave some money to banks in order to not foreclose on mortgages. The amount was not large enough to really help everyone, but it was the start of New Deal-type policies.

Question 13

Reconstruction Finance Corporation

Answer 13

Hoover era policy designed to help failing businesses. It did not have a large amount of money and mostly gave to connected businesses like the Chicago Bank which was run by a former Republican politician.

Question 14

Relief and Reconstruction Act in 1932.

Answer 14

Gives money (1.5 bil) to be spent on public works like roads, railroads, dams and infrastructure.

Question 15

Bonus Army

Answer 15

A group of US WWI veterans demand early payment of a bonus promised for fighting in WWI. This is denied by the government. They form a protest camp outside the White House which is eventually forcibly dispersed with some 135 arrests. This is unpopular and hurts Hoover’s chances of re-election.

Question 16

Roosevelt’s 100 days: Economy

Answer 16

Emergency Relief Administration, National Industrial Recovery Act, Civilian Conservation Corps are created to spend more money. This is designed to reduce unemployment and stimulate demand, resulting in the first use of Keynesian stimulus policies.

Question 17

Roosevelt’s 100 days: Banking insurance

Answer 17

Emergency Banking Act: Government promises deposit insurance, saying it will replace the bank accounts of people who lose their money when banks go out of business.

Question 18

Glass–Steagall

Answer 18

Separates “Commercial” and “Investment” banks. Commercial banks that accept normal people’s saving need to follow rules making them invent in safer assets to make it less likely they will go out of business and threaten people’s savings.

Question 19

The Farm Relief Act of 1933

Answer 19

Gives the government the power to set production quotas and reduce the production of food. It also let the government purchase and destroy extra food. This benefitted farmers as they profited from higher food prices but hurt everyone else.

Question 20

Securities Act of 1933

Answer 20

Makes it illegal to sell stocks on a stock exchange without sharing all information about the company with buyers. This is done to reduce speculation and prevent stock market bubbles.

Question 21

Emergency Relief Appropriation Act

Answer 21

Large plank of the 2nd new deal in 1935. Spends large amounts of money on things such as the Works Progress Administration and the National Youth Administration as Social Security. It spend about $4.5

Question 22

Social Security Act

Answer 22

Adds government support for various types of people who can’t work. Covers unemployed, disabled, widows and people over 65.

Question 23

The 1935 Banking Act

Answer 23

Makes it easier for the government to expand the money supply by expanding its power over the Federal Reserve Bank as well as creating the FDIC making bank insurance permanent.

Question 24

Federal reserve bank (Fed)

Answer 24

Organization responsible for creating money in the US. Usually referred to as central bank.

Question 25

National Industrial Recovery Act (National Recovery Act)

Answer 25

Law passed by Roosevelt in 1933 that allowed corporations to work together to fix wages, labor conditions and often prices. It emphasized these would be set through negotiations with unions. It was ruled unconstitutional in 1936.

Question 26

Civilian Conservation Corps

Answer 26

Agency designed to reduce unemployment by hiring people to work on various conservation projects in 1933 as part of the New Deal.

Question 27

Tennessee Valley Authority

Answer 27

Hires a lot of people to work in the Tennessee Valley, an underdeveloped part of the US in 1933 as part of the New Deal.

Question 28

United States v. Butler

Answer 28

Supreme Court overturns Agricultural Adjustment Administration’s attempts to fix prices in Agriculture.

Question 29

Boss Tweed

Answer 29

New York politician known for machine politics. He was very corrupt. For example, he bought a marble quarry and used his position as city alderman to get the city to buy it for inflated prices. He was eventually arrested as a result of Thomas Wade’s series of exposes in the New York Times.

Question 30

Machine politics

Answer 30

Powerful local politicians would provide services to poor, usually immigrate communities in exchange for votes. They were often very corrupt, mostly looking out for their own ethnic group.