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What two things did the federal
government do to try to help the
failing economy in the 1920s?
1. Raise interest rates
2. Hawley Smoot Tariff
Do Now:
What is a “depression”?
Now Do:
Is the United States experiencing
a depression right now (or have
we recently)?
Depression:
a sustained, long term
downturn in an economy; more
severe than a recession; a
decline in GDP* of more than
10% for more than a year
*GDP: the amount of goods/services
produced in a year
Objectives -Define “depression” in economic terms
-Describe factors that led to the Great Depression
EQ:
Agenda -Notes
-Skits
-Video Clip
How can economic excesses contribute to
hardship and instability in America?
The Business Cycle
boom period of prosperity; business well above
normal. (Factories turn out large quantities of goods
and profits rise. Most people have jobs, and most
wages to increase.)
panic period of uncertainty or fear followed by a
decrease in business activity. (The term "panic" has
sometimes been used to referred to as the start of a
depression.)
depression business is far below normal. Production
decreases by 15% or more during severe depressions.
(This period is marked by high unemployment, a
decline in company profits, and a cutback in wages.)
recession business is somewhat below normal.
(Employment, wages, and company profits are down,
but not as dramatically as during a depression.)
Identify the Boom, Panic, Depression and Recession in this graph:
•A: Recession
•B: Boom
•C: Panic
•D. Depression
READING…
Use pgs. 464-471 in your textbook
to help you identify factors
contributing to the Nation’s Sick
Economy…
Industry
Key industries barely made a profit
Some businesses fell behind
Foreign competition
New American technology
Hawley-Smoot Tariff Act
Highest protective tariff in U.S. history
Declining demand for goods
Coal industry declined because of new sources of energy
New housing starts declined
Affected other businesses dependent on home construction
Agriculture
Demand for farms products fell significantly
Move from country to city=less need for farming products
Prices fell
Farmers could not pay debts and lost farms
Rural banks failed
Consumer Spending
Easy credit
Given out by businesses
Encouraged consumers to pile up debt
Consumer decreased purchases because
Rising prices
Stagnant wages
High levels of debt
Distribution of Wealth
Standard of living
Half of America’s families did not make
enough
Rich kept getting richer/poor getting poorer
Most consumers had too little to spend
Hurt American factories
Stock Market Investors
Engaged in speculation
Bought on margin (pay only a small percentage of money owed for the stock)
Brought the market upward
Caused great wealth on paper
Panic: Market crashed
Investors lose everything
Dow Jones Industrial Average plummets
Measures the stock market’s health
Black Tuesday
October 29- The day the stock market crashed.