Lesson 5: Entering the Great Depression

Question 1

Bankrupt Definition

Answer 1

unable to pay debts

Question 2

Black Tuesday Definition

Answer 2

October 29, 1929, the date of the stock market crash that began the Great Depression

Question 3

Bonus Definition

Answer 3

an additional sum of money

Question 4

Bonus Army Definition

Answer 4

a group of veterans who marched to Washington in 1932 to demand immediate payment of a World War I bonus

Question 5

Great Depression Definition

Answer 5

the most severe economic decline in United States history, beginning in 1929

Question 6

Hooverville Definition

Answer 6

a group of shacks in which the homeless lived during the Great Depression

Question 7

On Margin Definition

Answer 7

a practice that allows people to buy stock by making a down payment of a portion of the full price and borrowing to cover the rest of the price

Question 8

Public Works Definition

Answer 8

the construction of government-funded public buildings, roads, dams, and other public structures

Question 9

Relief Program Definition

Answer 9

a government program to help the needy

Question 10

Soup Kitchen Definition

Answer 10

a place where food is provided to the needy at little or no charge

Question 11

How did many Americans feel about their new President, Herbert Hoover? How did he feel?

Answer 11

Most Americans had great confidence in their new President, Herbert Hoover, when he was inaugurated in March 1929. For most of the 1920s, Hoover had served in the Cabinet as secretary of commerce. In that role, he had helped to create the greatest prosperity the country had ever seen. During the 1928 campaign, he assured voters, “We in America are nearer the final triumph over poverty than ever before in the history of any land.”

Question 12

True or False: Only seven months after Hoover’s inauguration, the stock market crashed. The United States began a plunge into the worst economic depression in its history.

Answer 12

True

Question 13

When Hoover took office in 1929, what condition was the economy in? Did he recognize any signs of trouble? Despite this, what did he realize?

Answer 13

When Hoover took office in 1929, he saw a growing economy. Along with most of the nation’s leaders, he did not recognize the signs of trouble. Hoover did realize that some Americans had not shared in the prosperity of the 1920s. As you have read, farmers already faced hardship in the 1920s. So did workers in the textile and coal industries. For workers in those industries, a booming economy was something they only read about in the newspapers.

Question 14

Why did no one notice the economic slowdown throughout the mid-1920s?

Answer 14

In the mid-1920s, the overall economy began to slow down. No one noticed the slowdown because at that time the government did not keep detailed statistics.

Question 15

By August 1929, what did some investors start worrying about? What did they do? What did more do in September? What did this result in? What did Hoover say about the situation? Did it calm the people?

Answer 15

By August 1929, some investors worried that the boom might soon end. They began selling their stocks. In September, more people decided to sell. The rash of selling caused stock prices to fall. Hoover reassured investors that the “business of the country … is on a sound and prosperous basis.” Despite the President’s calming words, the selling continued and stock prices tumbled.

Question 16

As stock prices fell, what did investors on margin need to do, which ultimately led to lower stock prices?

Answer 16

Many investors had bought stocks on margin. Buyers of stocks on margin pay only part of the cost of the stock when they make the purchase. They borrow the rest from their stockbrokers. With prices falling, brokers asked investors to pay back what they owed. Investors sold their stock to repay their loans.

Question 17

Between October 24, 1929 and October 29, 1929, what were people doing? What happened as a result? What happened on October 29, 1929? Why did stock prices plunge?

Answer 17

A panic quickly set in. Between October 24 and October 29, desperate people tried to unload millions of shares. As a result, stock prices dropped even further. When the stock market opened on Tuesday, October 29, a wild stampede of selling hit the New York Stock Exchange. Prices plunged because there were no buyers. People who thought they owned valuable stocks were left with worthless paper.

Question 18

How did business leaders try to restore faith in the economy after Black Tuesday, on October 29, 1929?

Answer 18

After Black Tuesday, as it came to be called, business leaders tried to restore confidence in the economy. John D. Rockefeller told reporters, “My son and I have for some days been purchasing some common stocks.” Replied comedian Eddie Cantor, “Sure, who else has any money left?”

Question 19

What is the Great Depression? How long did it last? Did the stock market crash cause the Great Depression? What did it do? What did people do as the Depression worsened?

Answer 19

The period of economic hard times that followed the crash is known as the Great Depression. It lasted from 1929 to 1941. The stock market crash did not cause the Great Depression, but it did shake people’s confidence in the economy. As the depression worsened, people tried to understand how the prosperity of the 1920s had vanished.

Question 20

How did overproduction and the fact that corporate profits were not shared with workers contribute to the Great Depression?

Answer 20

Among the chief causes of the Great Depression was overproduction. American factories and farms produced vast amounts of goods in the 1920s. Vast corporate profits made from increased production were not passed on to workers. As a result, the gap between rich and poor widened with the middle class slipping into poverty. In fact, over one third of American assets were owned by one percent of Americans—those with the most money. Having such a small number of people in control of so much wealth contributed to an economic slump. First, the wealthy were more likely to save the money than spend it like those who were less wealthy. Second, those who were less wealthy saw their buying power fall. Because wages did not keep up with prices, workers could not afford to buy the goods that corporations continued to produce. Factories and farms were producing more goods than people were buying. As orders slowed, factories laid off workers.

Question 21

How did weakness in the banking system contribute to the Great Depression?

Answer 21

Another cause of the depression was weakness in the banking system. During the 1920s, banks made unwise loans. For example, banks lent money to people who invested in the stock market. When the stock market crashed, borrowers could not repay their loans. Without the money from the loans, the banks could not give depositors their money when they asked for it. As a result, many banks were forced to close. More than 5,000 banks closed between 1929 and 1932. When a bank closed, depositors lost their money. Often, a family’s lifetime savings disappeared overnight.

Question 22

How did the crashing of the stock market lead to a series of troubles?

Answer 22

After the stock market crash, the economy slid downhill at a fast pace. One disaster triggered another. The stock market crash, for example, ruined many investors. Without capital, or money, from investors, businesses could no longer grow and expand. Businesses could not turn to banks for capital because the banks were also in trouble.

Question 23

What happened as factories cut back on production? What happened to unemployment and bankruptcy? What did this result in?

Answer 23

As factories cut back on production, they cut wages and laid off workers. Unemployed workers, in turn, had little money to spend, so demand for goods fell further. In the end, many businesses went bankrupt—they were unable to pay their debts. As bankrupt businesses closed, even more people were thrown out of work.

Question 24

How did the Great Depression lead to a worldwide economic crisis?

Answer 24

The Great Depression led to a worldwide economic crisis. In the 1920s, the United States had loaned large sums to European nations. When American banks stopped making loans or demanded repayment of existing loans, European banks began to fail. The depression spread from nation to nation. By 1930, it had led to a worldwide economic collapse.

Question 25

Remember: The United States had suffered earlier economic depressions. None, however, was as severe as the Great Depression. In earlier times, most Americans lived on farms and grew their own food. In the 1930s, millions of Americans lived in cities and worked in factories. When factories closed, the jobless had no money for food and no land on which to grow it.

Answer 25

The United States had suffered earlier economic depressions. None, however, was as severe as the Great Depression. In earlier times, most Americans lived on farms and grew their own food. In the 1930s, millions of Americans lived in cities and worked in factories. When factories closed, the jobless had no money for food and no land on which to grow it.

Question 26

As the depression increased, what happened to unemployment?

Answer 26

As the depression spread, the unemployment rate soared. By the early 1930s, one in every four workers was jobless. Millions more worked shortened hours or took pay cuts. Many of the jobless lost their homes. On city streets, people sold pencils and begged for money.

Question 27

During the Great Depression, what were the chances of finding work? Out of the 5,000 people looking for a job at a New York job agency, how many succeeded? What were other jobs people competed for or took up?

Answer 27

The chance of finding work was small. On an average day, one New York job agency had 5,000 people looking for work. Only about 300 found jobs. In another city, police had to keep order as 15,000 women pushed and shoved to apply for six jobs cleaning offices. Some of the jobless shined shoes on street corners. Others set up sidewalk stands and sold apples.

Question 28

How did the Great Depression effect families?

Answer 28

During the depression, families suffered. Marriage and birth rates dropped. Hungry parents and children searched through city dumps and restaurant garbage cans for food. In one school, a teacher ordered a thin girl to go home to eat. “I can't,” replied the girl. “This is my sister's day to eat.” The pressure of hard times led some families to split up. The scarcity of food and work led to fathers and even children as young as 13 or 14 years old to leave home to hunt for work. Their leaving meant the family had fewer people to feed, but it also came at a cost: there were fewer people to care for any young children or elderly at home.

Question 29

What did jobless men and women do? What does it mean to have “rode the rails”?

Answer 29

Jobless men and women drifted from town to town looking for work. Some “rode the rails,” living in railroad cars and hitching rides on freight trains. Louis Banks, a young African American, later described what it was like to ride the rails.

Question 30

How did Americans try to cope with the Great Depression? What did they do in an attempt to combat it?

Answer 30

Americans did their best to cope. They attempted to meet their basic needs by utilizing the scarce resources they possessed. Neighbors shared what little they had. Some families doubled up, taking in aunts, uncles, and cousins. Some families began to grow vegetables and can foods instead of shopping in stores.

Question 31

How did the Great Depression effect American morale?

Answer 31

The Great Depression shook Americans' belief in themselves. Many Americans defined their self worth partly on their ability to produce and consume goods and services. Without the opportunity to be productive members of the economy, many found their self worth diminished. “No matter that others suffered the same fate, the inner voice whispered, ‘I'm a failure,’” one unemployed man wrote.

Question 32

How concerned was President Hoover about the suffering? Why did he not want the government to become directly involved in ending the crisis? What did he think should end the crisis?

Answer 32

President Hoover was deeply concerned about the suffering. However, Hoover did not believe that government should become directly involved in helping to end the business crisis. He feared that government might become too powerful. It was up to businesses, he felt, to work together to end the downslide.

Question 33

Why did Hoover oppose government relief programs? What did he say to do initially? What are soup kitchens? What were the results?

Answer 33

At first, Hoover also opposed government relief programs—programs to help the needy. Instead, the President urged business leaders to keep workers employed and to maintain wages. Hoover also called on private charities to help the needy. Churches set up soup kitchens, places where the hungry could get a free meal. Ethnic communities organized their own relief efforts. In San Francisco's Chinatown, fraternal societies gave out food and clothing. Father Divine, an African American religious leader in New York's Harlem, fed 3,000 hungry people a day. Mexican Americans and Puerto Ricans turned to aid societies. Still, the numbers of the needy soon overwhelmed private charities.

Question 34

How did Hoover’s belief in a limited government influence his initial approach to the conflict? What was his new approach?

Answer 34

President Hoover's strong belief in limited government affected his initial response to the economic crisis. Soon after taking office in 1930, he declared, “Prosperity cannot be restored by raids upon the public Treasury.” However, as the Depression continued, he adopted some policies that he hoped would help people help themselves and stimulate the economy.

Question 35

What were the public works programs, established by Hoover during the Great Depression? What was their goal? What was the Reconstruction Finance Corporation, established in 1932? What did they do and and what was their goal?

Answer 35

He set up public works programs. Public works are projects built by the government for public use. The government hired workers to build schools, construct dams, and pave highways. By providing jobs, these programs enabled people to earn money. Hoover also asked Congress to approve the Reconstruction Finance Corporation, or RFC, in 1932. The RFC loaned money to banks, railroads, and insurance companies to help them stay in business. Saving these businesses, Hoover hoped, would save thousands of jobs.

Question 36

Despite President Hoover’s actions, what were the results?

Answer 36

Hoover did more to reverse hard times than any previous President. However, his efforts were too little and came too late. In 1931, as the third winter of the depression approached, more and more people joined the ranks of the hungry and homeless. “Men are sitting in the parks all day long and all night long,” wrote one man in Detroit.

Question 37

Why did many Americans blame President Hoover? Why did Hoover not want to develop a welfare system? What derogatory connotations were made using his name?

Answer 37

Many people blamed the President for doing too little. He refused to establish a welfare system for those out of work, believing it would further devastate American morale. However, people were desperate for any help they could get. They gave the name Hoovervilles to the clusters of shacks where the homeless lived. People spoke of “Hoover blankets,” the newspapers used by the homeless to keep warm when they slept outside. A cardboard patch that covered a hole in a shoe was called “Hoover leather.” Men, women, and children lined up for “Hoover stew,” the name they gave to the thin soup they received in soup kitchens.

Question 38

True or False: President Herbert Hoover developed public works programs to provide Americans with jobs in the 1930s. The Hoover Dam on the Colorado River was one such project.

Answer 38

President Herbert Hoover developed public works programs to provide Americans with jobs in the 1930s. The Hoover Dam on the Colorado River was one such project.

Question 39

Who were the Bonus Army, and what was their objective? What happened between the House of Representatives and the Senate concerning their promised bonus? What did this result in? What did the attack on the Bonus Army’ camp do to the President’s popularity?

Answer 39

While people waited for the government to help, one group of Americans took action. After World War I, Congress had voted to give veterans a bonus, or additional sum of money, to be paid in 1945. In 1932, more than 20,000 jobless veterans marched to Washington to demand the bonus right away. For two months, the Bonus Army, as the group of veterans were called, camped in a tent city along the Potomac River. The House of Representatives voted to give the veterans the bonus at once, but the Senate rejected the bill. Senators thought that the cost would prevent government action to aid the country's recovery. Many discouraged veterans then went home. However, thousands of others remained, vowing to stay until 1945 if necessary. Local police tried to force the veterans to leave. Battles with police left four people dead. Hoover then ordered General Douglas MacArthur to clear out the veterans. Using cavalry, tanks, machine guns, and tear gas, MacArthur moved into the camp and burned it to the ground. After the attack on the Bonus Army, the President lost what little support he still had. Convinced that the country needed a change, many Americans looked for a new leader.