The US economy Flashcards
How was the unequal distribution of wealth a weakness of the American economy?
Half of Americans live below poverty line
Although USeconomy generating money; money was not going into the pockets of those who needed it most
How was overproduction a weakness of the American economy?
Demand for one-buy items fell when everyone had got them
- factories produce fewer goods
- cut back on work forces
- fewer people afford consumer goods
How was tariff policy a weakness of the American economy?
Tariffs protect US industry at home
- US businessmen sell goods, foreign gov set high tariffs on American goods
- -> US businessmen had difficulty selling goods abroad
How was financial speculation a weakness of the American economy?
More shares bought in companies
‘On the margin’ - 10% of cost an borrowing remaining 90% banks
‘Bull market’ = more confidence and gambling
Gambling = speculation
What year did share prices not rise as much as they had done in previous years
1928
What did some experienced investors do when the share prices did not rise as high
They sold their shares before values fell
What did the bull market turn into and what does this type of market mean?
A bear market.
This market was one where prices fall
When was the Wall Street crash
Thursday 24 October 1929
What was the Wall Street crash later called?
Black Thursday
How many shares were sold on Black Thursday and what happened as a result of this
13 million
Nobody wanted to buy - prices divided
How much did a group of bankers spend on buying the shares
$250 million
Why did bankers put so much money into buying the shares after the crash and did this tactic work?
They hoped to encourage investors to buy rather than sell shares
Tactic worked - share prices stopped falling
What day was there renewed panic about the shared and how many were sold on this day
Monday 28th October
9 million shares sold at falling prices
How many shares were sold on Tuesday 29th October
16 million shares at whatever price they could get
What was a result of the Tuesday 29th shares sold and how much did the shareholders lose
Prices of shared tumbled
Shareholders lost a total of $8 billion on this day alone
What was the price of a Woolworths share on 3 September and 13th November?
3rd - $100
13th - $52
What was the price of shares of General Electric on 3rd September and 13th November
3rd - $396
13th - $168
One of biggest falls
When did the fall of share prices bottom out?
Mid November
What was the effect of The crash on American confidence
Confidence in the American economy was destroyed
What cycle did America fall into after the wall st crash?
The cycle of depression
Describe the cycle of depression (4 points)
- reduced demand for consumer goods
- reduced production of consumer goods
- increased unemployment
- less money available to spend on consumer goods
Why was there a ‘run’ on the banks
People lost confidence in banks, anticipated that they are now unstable and therefore wanted to withdraw all their savings
How many banks collapsed in 1929 alone?
700 banks
Why did banks particularly suffer in the crash?
Many banks had invested their customers money in shares
How did banks attempt to recover some of their money
They began to call in loans from the companies and the ordinary people who had borrowed money from them
Why did the banks not get the money people owed them when they asked?
Because the people did not have the money, they lost it when share prices fell
What did companies who managed to stay open have to do?
Dismiss some of their workforce
How many businesses closed down during the worst period of the Great Depression
100,000
