Name: _______________________________
USVA History
Chapter 22.1 – The Nation’s sick economy
What is the most important thing for this section (Main Idea) Write it your own words–
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The Nation's Sick Economy
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The 1920’s were a time of _______________________ prosperity
Businesses were doing well
Wages were increasing
People bought all kinds of “______________________” items
o Cars, toasters, washers, vacuums, sewing machines
People thought the good times would continue forever and bought fancy items on
______________or with installment plans, assuming they would just pay it later
Trouble Ahead
As the 1920s advanced, economic prosperity slowed, but few noticed
1. _________________________ were in trouble
 Railroads, lumbering and mining industries were no longer making profits
 _________________________ had to start laying people off
o People without jobs do not have money to spend, which hurts other
_______________________
o People were also laid off b/c a lot of companies began using machines to do the
work
Trouble Ahead
2. Farmers were in ___________________________
 During WWI, farmers produced a lot of crops and sold a lot of crops
 After WWI farmers should have slowed production, but they didn’t
 They were unable to sell all their crops
 ____________________________needed money and took out loans
 Many farmers never repaid their loans which caused rural banks to fail
 Many farms were foreclosed on
 Congress tried to help and passed price-supports (______________________________ Bill)
 Gov’t would buy excess for and sell it overseas
 President Coolidge vetoed the bill
3. Consumers had less money to spend
 As businesses failed, wages were cut and people could not spend money on “extra” items
 Since nobody was buying, more businesses ______________________________,
causing more _______________________________, which caused even less money to
be spent in stores
4. Living on _______________________
 People were living above their means
 People could not afford to buy items out right so they paid for them on credit and
assumed they would pay it back later
 Credit Cards
 Installment Plans -paying off the total cost in _____________________ payments
 Buying Stocks ___________________________________- many wanted to invest in the
stock market, but could not afford to pay the full amount of the stock so they borrowed
from a broker (took out a ________________ to pay for it)
 Many couldn’t pay back the full amount of their loans or were so strapped for cash they
couldn’t spend money on other items, which hurt other businesses, causing more people
to become unemployed
5. _____________________________ distribution of wealth
 Rich got richer, poor got poorer
 Most earned less than $2,500 a _____________________
 Had no ___________________
 Relied on credit
Hoover takes over
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1928- ___________________________ wins the election
o Little focus on the _____________________
o People think the good times will continue
People believed investing in the stock market was the key to __________________
o Dow Jones Industrial Average was high (Bull Market)
o People began engaging in ___________________________
o Buy low, sell high
o Make quick money
o Many didn’t realize the risk, thought the market would continue to increase
People began buying ________________________ on the Margin
o Many couldn’t afford to pay the full amount of the stock so they borrowed money
from a broker
o Makes the market appear ____________________ than it actually is
o If Stock price declines, people have no way of paying off the loan
The government did little to discourage excessive ________________________
The Stock Market Crashes
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By early September 1929 many began to question the strength of the market
o People began ___________________________ their stocks
____________________________________- October 29, 1929
o Confidence in the market collapsed
o People began selling their stocks for pennies
 ___________________________ stocks sold
o Could not pay back their ________________________
 Caused banks to close, by November investors had lost
___________________________________
The Great Depression Begins
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1929-1940- time period where the economy plummeted and unemployment rose
o Banks Failed
o People panicked and went to their banks demanding their money
What is this called?
____________________________________________________________
 Many banks ______________________________ the money in the stock
market and did not have the money to give back
 Many lost their entire life savings
 The government did not _____________________bank accounts
 Today, FDIC up to $250,000
 By 1933-11,000 of 25,000 banks failed
Businesses Failed
o The _____________________________________________ (total output of
goods) was cut from 104 billion to 59 billion
o ___________________________________ businesses failed
Unemployment Rose
o From 3%-25%
Draw a line through the normal unemployment rate
The Great Depression
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The Depression _________________________________ throughout the world
o European nations were still trying to recover from _________________________
o ____________________________ was the center of the financial world
o Many nations relied on the US for loans
o Many also relied on the US to ____________________ goods
o US passed the __________________________________________________ Act
 Highest protective tariffs in US History
 Designed to protect American farmers and businesses
 It failed It stopped Europeans from buying _______________________
goods
 Increased _____________________________________
 encouraged other nations to pass similar tariffs