The Nation’s Sick Economy

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The Great Depression. The Nation’s Sick Economy. Do Now. What would happen if you spent more money that you actually had? What happens when many people and businesses are in that situation?. Examine the issues. 1. What jobs are recession proof? - PowerPoint PPT Presentation

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The Nations Sick Economy

The Nations Sick EconomyThe Great DepressionDo NowWhat would happen if you spent more money that you actually had?

What happens when many people and businesses are in that situation?Examine the issues1. What jobs are recession proof?

What things might you do is you cannot get a job with an established company?

What social services are available today compared to the unemployed people of 1929?ObjectivesSummarize the critical problems threatening the American economy in the late 1920s.

Describe the causes of the stock market crash and the Great Depression.

Explain how the Great Depression affected the economy in the United States and throughout the world.

Economic Troubles on the HorizonIndustries in TroubleBasic industries such as railroads, textiles and steel barely made a profit in the late 1920s

There was less demand for mining and lumbering after World War IEconomic Troubles on the HorizonFarmers Need a LiftDuring the war demand for crops such as wheat and corn were high

Farmers took out loans for more equipment and land

After WWI, the demand for such crops declined and farmers were left with debtfarmers could not pay loans and many of their farms went into foreclosureEconomic Troubles on the Horizon_______________________Federal price supports for key products such as wheat, corn, cotton and tobacco

The government would buy surplus crops at a guaranteed prices and sell them on the world market

President Coolidge vetoed the bill twiceQuestionWhat would a free market economist say about the Congresss bill for federal price supports?Economic Troubles on the HorizonLiving on CreditCreditthe arrangement in which consumers agreed to buy now and pay later for purchases

When people had trouble paying off debt, they cut back on spending

Economic Troubles on the HorizonUneven distribution of incomeDuring the 1920s rich got richer and the poor got poorer

More than 70% of the nations families earned less than $2,500 per year (considered a decent standard of living)

Many people could not afford the goods that manufactures made

Hoover Takes the NationElection of 1928______________( R) vs. ______________(D)Hoover wins following the years of prosperity in the 1920s

Hoover Takes the NationDreams of riches in the Stock Market____________________The most widely used barometer of the stock markets health

Made of the 30 largest firms traded on the stock market

Hoover Takes the NationWhat is speculation?

What does it mean to buy on margin?Hoover Takes the NationSpeculation people bought stocks and bonds in hope to make a quick profit

Buying on margin paying a small percentage of a stocks price as a down payment and borrowing the restThe unrestrained buying and selling fueled the markets upward spiralThink!What can speculation and buying on margin be compared to today?HomeworkContrast the Great Depression with todays recession. Use the text book and internet to complete a Venn diagram.

What is a recession? Two consecutive quarters of negative growth in the GDP.The Stock Market Crashes________________October 29, 1929 the bottom fell out of the market and people lost confidence

Shareholders rushed to sell their stocks

People who bought on margin were left with debt and many lost their life savings

Financial CollapseThe Great DepressionPeriod from 1929-1940 which the economy plummeted and unemployment skyrocketed

Financial CollapseBanks and Business FailuresMany people withdrew money from banksonly to find out that the banks had invested it in the stock market

600 banks closed in 1929

Unemployment went from 3% in 1929 to 25% in 1933Financial CollapseWorldwide shock wavesDepression was not limited the United States

Europeans were still trying to recover from WWI

Germany was forced to pay war reparationsthe Great Depression compounded the problems by limiting Americas ability to import European goods as well as making it difficult to sell American farm products and manufactured goods aboard

Financial Collapse_________________________Highest protective tariff in history

Designed to protect American farmers and industry, it had the opposite effect

Europeans retaliated with their own tariff and worldwide trade had failed more than 40 %Finical CollapseCauses of the Great Depression:___________________________________________________________________________________________________________________________________________________CloseCan a recession or a depression be prevented? If you were president, what policies would you put in place to ensure economic growth?