Causes of Stock Market CrashOctober, 1929

Business Cycle Terms

• Inflation: demand up, scarcity of goods up= prices rise

• Recession: demand falls, prices drop = supply is equal to or more than demand (think housing in Routt County 2008)

• Deflation: demand is lower than production, prices fall, productivity drops

• Depression: stock market crash, banks fail, unemployment, fear

Inflation

Recession

Deflation

Depression

FEAR

Causes of Great Depression

• Unequal distribution of wealth

• People in debt– Credit– Installment plans

• Overproduction– Industry &

agriculture overproduce

– “on margin” (lay-away) purchasing

– underconsumption

False prosperity

• People thought businesses were more successful than in reality

Banks Fail

• People rush to withdraw money• People lose $$ and savings due to poor

investments• Banks call in unpaid loans, people can’t afford to pay them back

FEAR