Chapter Introduction
Section 1: The Causes of the
Great Depression
Section 2: Life During the
Depression
Section 3: Hoover Responds to
the Depression
Visual Summary
What Causes
Depressions?
In the 1930s, the Great Depression
caused high unemployment,
business failures, and farm
foreclosures. Many people lost their
homes and savings and became
willing to vote for politicians who
offered new approaches to solving
the crisis.
• What kind of political and social
problems do you think
depressions cause?
• Why do you think the Great
Depression was worse than other
economic slowdowns?
The Causes of the
Great Depression
What factors led to the
Great Depression?
Life During the
Depression
How did people cope with
life’s struggles during the
Great Depression?
Hoover Responds to
the Depression
How did Hoover’s policies
attempt to lessen the Great
Depression?
Big Ideas
Economics and Society Stock speculation on an
unregulated stock market put investors and banks at
risk in the 1920s.
Content Vocabulary
• stock market
• speculation
• bull market
• bank run
• margin
• installment
• margin call
Academic Vocabulary
• collapse
• invest
• sum
People and Events to Identify
• Alfred E. Smith
• Black Tuesday
• Hawley-Smoot Tariff
Do you think that playing the stock
market is too risky?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
The Long Bull Market
A strong economy helped Herbert
Hoover win the 1928 election, but
increasing speculation in the stock
market set the stage for a crash.
The Long Bull Market (cont.)
• Herbert Hoover, a Republican, and Alfred E.
Smith, a Democrat, both ran for president
in 1928.
− Smith was the first Roman Catholic to win
a majority party’s nomination for president.
− Hoover defeated Smith, and promised a
bright future for the country.
Hoover and “Rugged Individualism”
The Long Bull Market (cont.)
• Sometimes the stock market experiences a
long period of rising stock prices, or a bull
market.
• In the late 1920s a prolonged bull market
convinced many people to invest in stocks.
• As the market continued to soar, many
investors began buying stocks on margin,
making only a small cash down payment.
The Long Bull Market (cont.)
• To protect the loan, a broker could issue a
margin call, demanding the investor repay
the loan at once.
• Buyers, hoping for a quick windfall, engaged
in speculation.
What was Smith’s biggest challenge
during the election of 1928?
A. Being a Roman Catholic
B. Republicans taking credit
for the nation’s prosperity
C. His stance on taxes and the
current economic situation
0%
D. His past
A
A.
B.
C.
0%
D.
B
A
B
C0%
D
C
0%
D
The Great Crash
Rising stock process led to risky
investment practices; when the stock
market crashed, banks were in trouble.
The Great Crash (cont.)
• By the latter half of 1929, the market was
running out of new customers.
− In September, professional investors
sensed danger and began to sell off their
holdings.
− Prices continued to fall.
The Great Crash (cont.)
• On October 24, a day that came to be called
Black Thursday, the market plummeted
further.
− On October 29, a day that was later
dubbed Black Tuesday, prices took the
steepest dive yet.
− By mid-November, stock prices had
dropped by more than one-third.
Stock Prices, 1920–1932
The Great Crash (cont.)
• The market crash severely weakened the
nation’s banks in two ways:
− First, by 1929 banks had loaned nearly
$6 billion to stock speculators.
− Second, many banks had invested
depositor’s money in the stock market,
hoping for higher returns than they could
get by using the money for loans.
Bank Failures, 1928–1933
The Great Crash (cont.)
• When the stock market collapsed, banks
lost money on their investments, and
speculators defaulted on their loans.
− Many banks then cut back drastically on
the loans they made.
− Consumers and businesses were not able
to borrow as much money.
− This helped send the economy
into a recession.
Bank Failures, 1928–1933
The Great Crash (cont.)
• More than 10 percent of the nation’s banks
had closed by 1932.
− If a bank collapsed, all customers lost their
savings.
− Some depositors made bank runs,
causing the banks to collapse.
Unemployment, 1928–1938
The stock market crash was the
major cause of the Great Depression.
A. Yes
B. No
A. A
B. B
0%
B
A
0%
The Roots of the Great Depression
An uneven distribution of income, tariff
policies, and the Federal Reserve
Board’s mistakes contributed to the
Great Depression.
The Roots of the Great Depression (cont.)
• The roots of the Great Depression were
deeply entangled in the economy of the
1920s.
• Most economist agree that overproduction
was a key cause of the Great Depression.
• Most Americans did not earn enough to buy
up the flood of goods they helped produce.
Causes of the Great Depression
The Roots of the Great Depression (cont.)
• During the 1920s, many Americans had
purchased high-cost items on the
installment plan.
− Paying off such debts eventually forced some
buyers to stop making new purchases.
− Because of the decrease in sales,
manufacturers in turn cut production and laid
off employees.
− A chain reaction ensued—when one company
shut down, many others were affected.
The Roots of the Great Depression (cont.)
• Many jobs might have been saved if American
manufacturers had sold more goods abroad.
− The Hawley-Smoot Tariff raised the average
tariff rate to the highest level in American
history.
− However, it failed to help American business
because foreign countries responded by
raising their own tariffs.
− By 1932 exports were about one-fifth of what
they had been in 1929.
The Roots of the Great Depression (cont.)
• Instead of raising interest rates to curb
excessive speculation, the Federal Reserve
Board kept its rates very low throughout the
1920s.
• The Board’s failure to raise interest rates
helped cause the Depression in two ways:
− First, by keeping rates low, it encouraged
member banks to make risky loans.
The Roots of the Great Depression (cont.)
− Second, its low interest rates led business
leaders to think the economy was still
expanding.
• The Board made another mistake after the
Depression hit—they raised interest rates,
tightening credit.
In 1929, the top 5 percent of all
American households earned what
percent of the nation’s income?
A. 10 percent
B. 30 percent
C. 50 percent
D. 70 percent
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Big Ideas
Past and Present As the Great Depression and the
drought worsened, thousands of people tried to find
work and shelter in other places.
Content Vocabulary
• bailiff
• hobo
• soap opera
Academic Vocabulary
• suspend
• colleague
• technique
People and Events to Identify
• Dust Bowl
• Walt Disney
• John Steinbeck
• William Faulkner
• Grant Wood
Can movies provide an escape from
life?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
The Depression Worsens
Hunger and homelessness became
severe problems by the early 1930s;
then, a terrible drought devastated the
Great Plains.
The Depression Worsens (cont.)
• Throughout the country, newly homeless
people put up shacks on unused or public
lands, forming communities called
shantytowns, or Hoovervilles.
− Many had been thrown out of their homes
by bailiffs.
• In search of work or a better life, many
hobos began to wander around the country.
The Depression Worsens (cont.)
• Farmers left many of their fields uncultivated
due to a drop in crop prices. When a drought
struck the Great Plains, the exposed soil
turned to dust.
• From the Dakotas to Texas, America’s wheat
fields became a vast “Dust Bowl.”
To where did most people from the
Great Plains migrate in hopes of a
better future?
A. Mexico
B. Canada
C. California
D. Florida
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Art and Entertainment
Movies and radio shows were very
popular during the 1930s, a period that
also produced new art and literature.
Art and Entertainment (cont.)
• The hard times of the 1930s led many
Americans to prefer entertainment that let
them escape their worries.
• In the late 1930s, the “superhero” genre was
born with the printing of the first tales of
Superman in 1938 and Batman in 1939.
Art and Entertainment (cont.)
• During the 1930s, more than 60 million
Americans went to the movies each week.
− Walt Disney produced the first featurelength animated film, Snow White and the
Seven Dwarfs, in 1937.
Art and Entertainment (cont.)
• While movies captured the imagination, radio
offered information and entertainment as
near as the living room.
− Radio dramas, nicknamed soap operas,
also became popular.
Art and Entertainment (cont.)
• Writers and artists tried to portray life around
them, using the homeless and unemployed
as their subjects in stories and pictures.
− John Steinbeck and William Faulkner
were two influential novelists.
Art and Entertainment (cont.)
• Photographers roamed the nation with the
new 35-millimeter cameras, seeking new
subjects.
− The striking pictures of photojournalists
Dorothea Lange and Margaret BourkeWhite showed how the Great Depression
had affected average Americans.
• Painters in the 1930s included Thomas Hart
Benton and Grant Wood, whose styles were
referred to as the regionalist school.
Which book did John Steinbeck write?
A. The Sound and the Fury
B. Huckleberry Finn
C. The Grapes of Wrath
D. The Scarlet Letter
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Big Ideas
Government and Society President Hoover’s ideas
about government shaped his response to the Great
Depression, making the government slow to respond.
Content Vocabulary
• public works
• relief
• foreclose
Academic Vocabulary
• series
• community
People and Events to Identify
• Reconstruction and Finance Corporation
• Bonus Army
Do you feel that the government
should intervene immediately if the
economy is struggling?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
Promoting Recovery
Hoover encouraged businesses to stop
laying off workers and created public
works projects.
Promoting Recovery (cont.)
• Hoover tried to downplay the public’s fears,
but his efforts failed to inspire the confidence
of the American people.
− He believed that the American system of
“rugged individualism” would keep the
economy moving.
Promoting Recovery (cont.)
• Hoover organized a series of conferences
to devise strategies for improving the
economy.
− By 1931, industry leaders had broken their
pledges to keep factories open and stop
slashing wages.
− He then increased the funding for public
works, but these projects only created
jobs for a small fraction of the millions who
were unemployed.
Promoting Recovery (cont.)
• Hoover believed that government had to
help banks make loans to corporations,
which could then expand production and
rehire workers.
− In an attempt to ease the money shortage,
Hoover set up the National Credit
Corporation (NCC) in October 1931.
− This program failed to meet the nation’s
needs.
Promoting Recovery (cont.)
• In 1932, Hoover requested that Congress
set up the Reconstruction Finance
Corporation (RFC) to make loans to
businesses.
− The RFC was overly cautious, however,
and failed to increase its lending
sufficiently to meet the need.
Promoting Recovery (cont.)
• From the start, Hoover strongly opposed
the federal government’s participation in
relief.
− He believed that only state and local
governments should dole out relief.
• However, in 1932, support for a federal relief
measure increased, and Congress passed
the Emergency Relief and Construction Act.
− By this time, however, the new program
could not reverse the accelerating collapse.
Did Hoover believe that the
government should step in to help
people, or that the individual should
help himself?
A. Government
A. A
B. B
A
0%
0%
B
B. Individual
In An Angry Mood
Farmers, veterans, and others who
were suffering grew frustrated and
demanded the government do
something to help.
In An Angry Mood (cont.)
• Farmers and the hungry poor began to
protest the conditions during the Depression.
• Creditors foreclosed on nearly one million
farms between 1930 and 1934, taking
ownership of the land and evicting families.
• In May 1932, several hundred Oregon veterans
began marching to Washington to lobby for
passage of the Wright Patman bill.
− The press termed these marchers the
“Bonus Army.”
In An Angry Mood (cont.)
• When the Senate voted down the bonus bill,
veterans began to grumble.
− General Douglas McArthur was put in charge
of handling the situation.
− National press coverage of troops assaulting
veterans further harmed Hoover’s reputation
and hounded the president throughout the
1932 campaign.
Although Hoover failed to resolve the economic
crises, what did he achieve?
A. He gave the Supreme Court
more power.
B. He expanded the federal
government’s economic role.
C. He created confidence in
the banking system.
D. He inspired Americans to
trust the government.
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Causes of the Depression
Long-Range Causes
• Uneven distribution of wealth ensures that many
consumers do not have enough income to purchase
the goods being produced.
• Interest rates are kept too low by the Federal Reserve,
which encourages businesses to borrow money and to
expand production beyond market demand.
• Overproduction by business eventually floods the
market with goods that cannot be sold. Businesses
begin laying off workers and shutting down production.
Causes of the Depression
Immediate Causes
• People and businesses borrow
money to invest in the stock
market; speculation drives
stock prices too high and when
they collapse, many people
lose all of their money, and
many banks collapse when loans are not repaid.
• As companies lay off workers, demand for goods falls
as workers lack the income to purchase goods being
produced. This in turn causes even more layoffs and a
cyclical effect sets in, driving up unemployment.
Causes of the Depression
Immediate Causes
• In order to protect American
companies from competition,
Congress raises tariffs. When
other countries respond in
kind, foreign demand for
American goods falls, further
hurting American companies.
Effects of the Depression
• Unemployment rises to record
levels.
• Many people, unable to pay
their debts, lose their homes
and farms; the homeless create
shantytowns, nicknamed
Hoovervilles, on the edges of
cities.
• Hunger marches, protests by farmers, and marches by
veterans seeking their bonuses indicate growing anger
among the population at economic conditions.
Effects of the Depression
• The Republican Party rapidly
loses political support,
enabling the Democrats to
take control of Congress.
• The federal government, for
the first time, begins providing
direct relief to citizens in need.
• Forms of entertainment, including movies, radio shows,
and comic books, focus on distracting people from their
daily lives.
Chapter Transparencies Menu
Why It Matters
Cause-and-Effect Transparency
Unit Time Line Transparency
Select a transparency to view.
stock market
a system for buying and selling stocks
in corporations
bull market
a long period of rising stock prices
margin
buying a stock by paying only a
fraction of the stock price and
borrowing the rest
margin call
demand by a broker that investors
pay back loans made for stocks
purchased on margin
speculation
act of buying stocks at great risk with
the anticipation that the price will rise
bank run
persistent and heavy demands from a
bank’s depositors, creditors, or
customers
installment
buying an item on credit with a
monthly plan to pay off the value of
the good
collapse
a sudden loss of force, value, or
effect
invest
to put money into a company in order
to gain a future financial reward
sum
a specified amount of money
bailiff
minor officer of the courts
hobo
a homeless and usually penniless
wanderer
soap opera
a serial drama on television or radio
using melodramatic situations
suspend
to temporarily stop an operation
colleague
a person who works in the same, or a
similar, profession
technique
a method of achieving a desired task
public works
projects such as highways, parks,
and libraries built with public funds for
public use
relief
aid for the needy; welfare
foreclose
to take possession of a property from
a mortgagor because of defaults on
payments
series
a number of events that come one
after another
community
people with common characteristics
living in the same area
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