U5L5 Entering the Great Depression Flashcards
What did Hoover not realize, that later took part in starting the Great Depression?
Hoover did realize that some Americans had not shared in the prosperity of the 1920s. 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.
Why did no one notice the slowing economy?
At that time the government did not keep detailed statistics.
What caused stock prices to fall?
The rash selling
Even though the stock prices were falling, what did President Hoover say?
Hoover reassured investors that the “business of the country … is on a sound and prosperous basis.”
What does it mean to buy stock on margin? With prices falling, what effect did it have on investors?
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.
Between October 24 and October 29, desperate people tried to unload millions of shares. What did this cause?
Stock prices dropper even further
When the stock market opened on Tuesday, October 29, a wild stampede of selling hit the New York Stock Exchange. What happened to the prices of stocks?
Prices plunged because there were no buyers. People who thought they owned valuable stocks were left with worthless paper.
What was Black Tuesday?
Worried people gather outside the New York Stock Exchange on October 24, 1929, the day the crash began, also known as Black Thursday.
How long did the Great Depression (1929) last?
1929 to 1941 (12 years)
The stock market crash did not cause the Great Depression. What did it do instead?
It shock people’s confidence in the economy
How was overproduction one of the main causes of the Great Depression?
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. Why?
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.
How did overproduction affect workers?
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.
How was the banking system another cause of the depression?
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.
What happened to depositors when a bank closed?
When a bank closed, depositors lost their money. Often, a family’s lifetime savings disappeared overnight.
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.
Yeah. What they said.
How did many people lose their jobs during the Great Depression?
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. As bankrupt businesses closed, even more people were thrown out of work.
