Collapse

CollapseThe Causes of the Great Depression

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Ronald Reagan once said, “A recession is when your neighbor loses his job. A depression is when you lose yours.”Having lived through a major recession, what do you feel is the difference between a recession and a depression?

The Problem

Overvalued stock marketOver production in factories and

farmsTariffs hurting exportsDepression in farming industryHigh consumerism purchases on

credit

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop.

Quantity

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Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) and other suppliers of raw materials.

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods

Quantity

$

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods Result: Countries put high tariffs on U.S.

goods. Exports collapsed

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods Result: Countries put high tariffs on U.S.

goods. Exports collapsed Because demand lowered but supply

stayed the same, companies overproduced consumer and durable goods

Quantity

$

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods Result: Countries put high tariffs on U.S.

goods. Exports collapsed Companies overproduced consumer and

durable goods Result: Business began to go in debt.

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods Result: Countries put high tariffs on U.S.

goods. Exports collapsed Companies overproduced consumer and

durable goods Result: Business began to go in debt

Corporate Profits plummeted

Quantity

$

Causes of the Depression

Overproduction of raw goods (commodities) caused their price to drop. Result:▪ Decrease wages for farmers and miners (25%

population) The Hawley-Smoot Tariff blocked

overtaxed foreign goods Result: Countries put high tariffs on U.S.

goods. Exports collapsed Companies overproduced consumer and

durable goods Result: Business began to go in debt

Corporate Profits plummeted Result: Stock Market Collapsed

October 1929

During the late 1920s stock prices soared because of margin buying. Margin Buying: This is

when an investor borrows money and then invests that money in the market.

DJIA

October 1929 As the earnings of

companies began to fall brokers began to demand investors pay them back. Investors pulled their

money from the market in mass in autumn of 1929.

The market fell nearly 25% in two days destroying the fortunes of many.

Check Up!

List three causes of the Great Depression.1. 2. 3.

When did the GDP of the United States begin to fall rapidly?

Banks and stock markets crash, wiping out people’s savingsPeople have lost their savings and can no longer get loans from banks to buy consumer goodsBusiness lower prices to compete but eventually

factories and businesses close because no one can afford their goods. As a result people lose

their jobs

People without jobs can not deposit money into banks or invest in the market or buy consumer

goods.

Within 4 years unemployment had risen from 4% in 1929 to 25% in 1933.

By 1932 the stock market had fallen more than 80% from its high in 1929.

Hundreds of banks closedBillions of dollars in investments and

savings disappearedThis period of time became known as

the Great Depression.

Think, Pair, Share What was the recession of 1929

considered a depression while the financial crisis of 2008-2009 considered a recession.

Step 1: Think, write down your thoughts Step 2: Pair, talk you your neighbors Step 3: Share, discuss with the whole

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