Unit 2 Lesson 1: Causes of the Great Depression Flashcards
Who won the presidential election of 1928
Herbert Hoover won the presidential election of 1928
How did the repulican party help Hoover win
He benefited from the popularity of his political party. The two Republican administrations before his helped create a time of economic prosperity.
How did Hoover increase civil service reform
He continued civil service reform by expanding opportunities for employment throughout the federal government
(Presideny Hoover) What was the Department of Justice
He directed the Department of Justice to crack down on organized crime. This led to the arrest and imprisonment of the infamous gang leader, Al Capone.
By the summer of 1929, Hoover had signed into law the Agricultural Marketing Act. What is that act; what did it do?
This law created the Federal Farm Board to help regulate farm prices.
Hoover’s other accomplishments include:
- expanded tax cuts across all income classes
- set aside federal funds to clean up slums in major American cities
- created the Veterans Administration and expanded veterans’ hospitals
- established the Federal Bureau of Prisons to oversee prison conditions nationwide
- reorganized the Bureau of Indian Affairs to further protect Native Americans
What old age pension program did Hoover propose
Hoover even proposed the creation of an old-age pension program, promising 50 dollars per month to all Americans over the age of 65. This proposal was remarkably similar to the social security benefit that would become a centerpiece of Roosevelt’s New Deal programs several years later.
What factors led to overproduction in the United States?
Farmers scaled up production to meet the demands of World War I. Many farmers purchased more land to support increased production. After the war ended, the demand for agricultural goods overseas dropped.
What were the effects of overproduction?
Farmers produced more than was needed, causing prices for agricultural goods to plummet. As a result, incomes decreased, and many struggled to pay mortgages and other debts.
Why do you think Hoover focused on addressing these issues early in his presidency?
Agriculture was a large part of America’s economy, and it had been struggling for a long period of time. Providing immediate relief to this industry would ultimately contribute to the nation’s general prosperity.
In the midst of the Great Depression, President Herbert Hoover left office with one of the lowest presidential approval ratings ever. Americans had been disappointed with his handling of the unprecedented economic crisis. However, he had actually accomplished several major policy goals during his presidency :
- Hoover increased the federal budget to include children’s programs. He hosted the White House Conference on Child Health and Protection to discover how the government could actively ensure the welfare of children. The Children’s Charter created at this conference identified the rights and needs of children.
- Hoover backed prison reform. He had new prisons built to reduce overcrowding, authorized improved training for prison employees, and advocated for the humane treatment of prisoners.
- Hoover was a leading conservationist. He revoked private oil leases on public lands, limited pollution of coastal waters, and expanded millions of acres of protected national park lands.
- Oh, and he funded infrastructure improvements, particularly dams.
what does business cycle mean
Though there were some periods of recession during the Roaring Twenties, few anticipated the business cycle, or pattern of economic expansion and contraction, would contract so sharply at the end of the decade and into the 1930s.
On Tuesday, October 29, 1929, often referred to as
Black Tuesday
What is Black Tuesday
Black Tuesday, prices of stocks at the New York Stock Exchange fell rapidly.
What is considered to be the start of the great depression
This stock market crash is considered to be the start of the Great Depression
Casues of the Crash: Lower rates and requirments
Lower rates and requirements: The Federal Reserve set interest rates artificially low and eased the reserve requirements—or the money financial institutions had to keep on hand—on the nation’s largest banks.
Casues of the Crash: Increased money supply and investments
Increased money supply and investments: An increase in the country’s money supply convinced even more Americans of the safety of investing in questionable schemes.
Casues of the Crash: Speculation
Speculation: Investors made high-risk purchases they hoped would pay off quickly, and this became the norm.
Casues of the Crash: Margin buying
Margin buying: One dangerous type of speculation was buying “on margin.” Investors would borrow money to make a small down payment on stocks, hoping to sell them at a much higher price before the remaining payment came due.
Casues of the Crash: Market losses
Market losses: The stock market experienced a brief downturn in September 1929 followed by market corrections of 11% on October 24 and 13% on October 28. To prevent additional losses, stockholders dumped their stocks as quickly as they could on October 29.
Effects of the Crash:
- On October 29, 1929, stockholders traded more than 16 million shares, and a lost more than $14 billion in wealth in a single day.
- Between September 1 and November 30, 1929, the stock market lost more one-half its value, dropping from $64 billion to approximately $30 billion.
- Banks, facing debt and seeking to protect their assets, demanded payment for the loans they had provided to individual investors. As a result, investors lost not only their stocks but also their life savings in a matter of minutes. And they were still indebted to the bank.
- While only 10 percent of households had investments, more than 90 percent of all banks had invested in the stock market. Many banks failed due to their dwindling cash reserves.
- Though the events on Black Tuesday were not the cause of the Great Depression, they did trigger the start of a recession that eventually grew into a full-blown depression in the United States and around the world.
What effect did the Stock Markert Crash have on the countrys gross national product
Following the stock market crash, the country’s gross national product declined by more than 25 percent within a year
What effect did the Stock Markert Crash have on wages and salries
wages and salaries declined by $4 billion
What effect did the Stock Markert Crash have on unemployment
. Unemployment tripled, from 1.5 million at the end of 1929 to 4.5 million by the end of 1930. Such widespread unemployment resulted in the loss of homes and forced many Americans to seek aid. Homelessness and bread lines became a reality for many.
Causes of the great depression: Risky Investing Practices
Explantion: Investors made risky investments and bought stocks on margin in the hopes of earning a quick payout.
Effect: When the stock market crashed, investors were unable to pay back the loans they had borrowed from banks to purchase the stocks.
Causes of the great depression: Overextension of Credit
Explantion:Businesses extended lines of credit to consumers through the 1920s, regardless of income level or ability to make payments.
Effect: Many consumers used credit to make large purchases they could not afford. After the stock market crashed, many people were unable to continue making payments on what they had purchased.
Causes of the great depression: Overproduction
Explantion: Production in many industries, including the agricultural sector, exceeded consumer demand prior to the stock market crash.
Effect: Many industries had laid off employees prior to the crash. As the depression deepened, fewer consumers could purchase goods. This led industries to lay off more workers, and in turn, further decreased consumerism.
Causes of the great depression: Lax Government Regulation
Explantion: The Federal Reserve lowered the amount of money banks were required to have on hand at any given moment. This led many banks to make risky investments with a larger percentage of the money people deposited.
Effect: When people went to withdraw their money, many banks did not have adequate funds.
Causes of the great depression: Bank Runs
Explantion: Investors, along with the general public, withdrew their money from banks by the thousands, fearing the banks would go under.
Effect: The more people pulled out their money in bank runs, the closer the banks came to failure due to lack of funds. Many banks ultimately failed, and countless Americans lost all of their savings.
The Great Depression was not unique to the United States. Its effects were felt on a global scale. What was it like for European countires
Many European countries had been suffering financially even before the Great Depression began. A post-World War I recession and continuing wartime inflation had hurt many economies. So did a decrease in agricultural prices, which made it harder for farmers to buy manufactured goods or pay off loans to banks.
At the same time, the U.S. government took measures to support its own economy. Congress put tariffs on imported goods to raise their prices to consumers. This was done in an effort to encourage people to buy American-made products. In turn, many other countries around the world embraced this practice of protectionism. How did this effect other countries
Ultimately tariffs enacted by the United States and its trade partners caused more economic distress.
A similar attempt to spur the world economy, known as the Hoover Moratorium, likewise met with significant opposition and little economic benefit. What was the Hoover Moratorium
The moratorium was issued in 1931 and called for a halt to World War I reparations continuing to be paid by Germany to France, as well as forgiveness of Allied war debts to the United States.
What was the U.S.’s 1930 Smoot-Hawley Tariff. What imapct did it have
, the U.S.’s 1930 Smoot-Hawley Tariff angered foreign trade partners, who raised their own tariffs in retaliation. This raised the cost of goods for consumers in all of these nations, deepening the economic crisis internationally.
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What was the Agricultural Marketing Act, and why was it signed into law?
The Agricultural Marketing Act created the Federal Farm Board to provide much needed funds to struggling farmers. The goal of the act was to improve market efficiency and mitigate the effects of years of overproduction and plummeting agricultural prices.
What are three reasons for the depression and high unemployment that followed the stock market crash in 1929?
People couldn’t afford to buy goods or invest in businesses, so those businesses had to lay off workers or cut wages. Overextension of credit meant that many consumers were unable to afford what they had purchased. Lax government regulations allowed banks to lower their cash reserves, meaning that many did not have adequate funds to cover withdrawals.
