Guided Reading Quiz
 1. Who ran for president for the Republicans when
Coolidge declined to run again?
 2. What is a bull market?
 3. How were many new investors able to affording
buying stock?
 4. What is a bank run?
 5. This was a key cause of the Great Depression
and led to the loss of jobs as sales declined.
 Bonus (10 points) What economic tool did the
government use to TRY to help American
businesses at the beginning of the Great
Depression?
Causes of the Great
Depression and Hoover’s
Response
Goal 9
Essential Idea
 There were four main causes to the Great
Depression: overspeculation, banks failing,
overproduction, and European policies.
Rugged Individualism
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The next president after
Coolidge:
Hebert Hoover
What he believed in:
Rugged individualism – the
government should stay out
of economic affairs (laissezfaire) and let people take care
of themselves
Effect #1: The Roaring
Twenties
Effect #2: The Great
Depression
Causes of Great Depression
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There were ____ main causes to the
________________________.
OBOE-
Hoover Inspires Investment
 O Overspeculation
 What is
overspeculation?
 Buying stocks and
selling them when they
increase in value (doing
it too much)
 Why is it bad?
 Speculating too much
makes the stock market
unstable
Buying on Margin
 How were so many
people able to
overspeculate?
 Buying on margin –
taking out loans from
stockbrokers and
banks to buy stock
Margin Call
 Margin calls –
demanding
immediate
payment for the
loans
 When might
stockbrokers or
banks issue a
margin call?
Black Tuesday
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October 21, 1929:
Stock prices fell,
stockbrokers responded
by issuing margin calls
People panicked, and
stock prices fell
Black Tuesday:
The worst day of the stock
market crash
10-15 BILLION dollars
was lost
 What was the
stock market
doing before
Black
Tuesday?
 How far did
the DJIA drop
on Black
Tuesday?
 How far did it
drop overall?
Banks Fail
 B Banks fail
 How were banks and
overspeculation related?
 Banks had loaned $6
billion to investors
 How did the stock
market crash hurt
banks?
 Investors could no
longer pay back loans,
and many banks
collapsed
Bank Runs
 Bank runs:
 Huge amounts of people ran to the banks to
withdraw their savings before the bank collapsed
Where’s the Money?
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Why didn’t the banks have the money?
The money was loaned out to other people
Effect on bank runs on banks: Thousands more banks collapsed
Effect of the bank runs on people: people lost their life savings
Overproduction
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OOverproduction
What is
overproduction?
Companies
producing more
than they can sell
People Stop Buying
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Why were people
NOT buying enough
products?
People lost money in
the stock market
crash
People lost money
when banks
collapsed
People’s money was
already tied up
making payments on
installment plans
Businesses Collapsing
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As a result, many businesses ________________.
When people stopped ______ products, businesses
had to ___________ workers.
Downward Spiral
 Businesses:
 Had to lay off workers
because they were not
selling enough product
 People:
 Could not afford to
buy products because
they had been laid off
 ETC
 ETC
 ETC
Remember the Circular Flow Chart?
(From Civics)
Product Market
Business Sector
Consumer Sector
Factor Market
Using Tariffs to Protect American
Businesses
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EEconomic Policies
New law by Congress:
Hawley-Smoot Tariff
What it did:
Raised tariffs (taxes on foreign imports) to
record levels
Tariff Backfires
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Intended effect:
Make people buy more American products
(as opposed to foreign products) and help
the economy
Actual effect:
Other countries raised their tariffs, which
made it harder for American companies to
sell overseas (hurting the economy even
more)
Hoover Responds
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Program:
Reconstruction Finance
Corporation (RFC)
Purpose:
Make loans to banks and
businesses to keep them
from collapsing
Why it failed:
It did not loan enough
money to slow down the
economic decline
Direct Relief
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Program:
Direct Relief
Purpose:
For the first time, the federal government
gave money directly to the citzens
Why it failed:
Too little, too late
People Getting Desperate
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Why Hoover did not do more, and do it sooner?
Hoover believed in “rugged individualism”
He thought Americans could get through economic problems on their own (he
actually though Americans would be insulted by hand-outs)
The Result:
Many people began to go hungry, organize marches, and rob grocery stores
Hoover &
the Great
Depression
Bonus for Veterans
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Government Law after World War I:
The law said that WWI veterans
would receive a $1000 bonus in
1945
Veterans during the Great
Depression:
Veterans began demanding
IMMEDIATE payment of the $1000
bonus
The Bonus Army:
A group of 1000 World War I
veterans that marched to
Washington, D.C. to demand their
bonuses
What happened:
Wearing their old uniforms, the
veterans gathered outside the
Capitol building
Bonus Armies
What happened:
The military, led by General Douglas MacArthur, used tanks, soldiers, and
tear gas to clear out the veterans
Affect on President Hoover’s image?
Bonus Army
VERY NEGATIVE