Ch. 22.1 The Nation’s Sick Economy
Section Objectives:
1. Summarize the critical problems threatening the American economy in the late 1920s.
2. Describe the causes of the stock market crash and Great Depression.
3. Explain how the Great Depression affected the economy in the United States and throughout the world.
One American’s Story
­Who was Gordon Parks?
● A well known photographer, author, and filmmaker. At age 16 he lost his job when the stock market
crashed.
­What crashed in 1929? What did this cause?
● The Stock Market, led to the Great Depression
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1. Economic Troubles on the Horizon
­What two groups of people were slipping deeper into debt?
Consumers and farmers
A. Industries in Trouble
­What industries struggled in the 1920s?
Railroads, textiles, steel, mining, lumber, automobile, construction, and housing
­Why did some of these industries struggle?
Railroads lost business to new forms of transportation
Mining and lumbering were not in demand after World War I.
When the housing market struggles many people lose jobs.
B. Farmers Need A Lift
­Why did farmers grow so many crops initially?
The international demand for crops during World War I.
­Why did the price in crops drop?
Demand for crops declined after World War I.
­Why happened to farmers when they could not pay their loans? What happened to the banks?
Banks seized their land and property, rural banks began to fail.
­What were price­supports? Who vetoed the bill for this twice?
When the government buys crops at a guaranteed price and sells them later on the world market, this idea
was vetoed by Calvin Coolidge.
C. Consumers Have Less Money to Spend
­Why were Americans buying less?
Rising prices, stagnant wages, and an unbalanced distribution of income, overbuying on credit.
­Why did consumers have less money?
Income gap between the rich and poor.
D. Living on Credit
­What is credit? What happens to people when they use too much credit?
When consumers agreed to buy now and pay later for purchases (installment plan).
People fall into debt.
E. Uneven Distribution of Income
­What did the unequal distribution of income mean for Americans?
Many people did not have the money to purchase the excessive amount of goods being produced.
1. Hoover Takes the Nation
­What two candidates faced off in the election of 1928? What political parties did they represent?
Herbert Hoover­Republican vs. Alfred Smith­Democrat
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A. The Election of 1928
­What advantage did Hoover have over Smith that helped him win the election of 1928?
Hoover could point to years of prosperity under Republican leadership since 1920.
B. Dreams of Riches in the Stock Market
­What is the Dow Jones Industrial Average?
A measure of the stock prices of 30 representative large firms trading on the New York Stock Exchange.
­Why did more people begin to buy stocks in the 1920s?
Stock prices were rising and people wanted to take advantage.
­What is speculation?
Buying stocks and bonds on the chance of a quick profit.
­What was buying on margin?
Paying a small percentage of a stock’s price as a down payment and borrowing the rest.
2. The Stock Market Crashes
A. Black Tuesday
­What happened on October 29, 1929?
● The stock market crashed
­What was Black Tuesday?
● The day the stock market crashed and the bottom fell out of the market and nation’s confidence.
­How did the stock market crash help cause the Great Depression?
● Investors lost 30 billion, others their savings, others bought stocks on credit and could not pay them off.
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3. Financial Collapse
­What was the Great Depression?
Period from 1929­1940 in which the economy plummeted and unemployment skyrocketed.
A. Bank and Business Failures
­What happened to banks and businesses in the economic collapse?
Banks had to close because people couldn’t pay back their loans.
Businesses went bankrupt.
B. Worldwide Shock Waves
­How did the Great Depression affect other countries?
European countries struggled with their debts from World War I, especially Germany.
America now had a difficult time importing goods to Europe to help them pay off their debts.
­What was the Hawley­Smoot Tariff? How did it make things worse?
The highest protective tariff in U.S. history, designed to protect American industries from foreign
competition.
The tariff made unemployment worse in industries that could no longer export goods to Europe.
C. Causes of the Great Depression
­What do many historians believe caused the Great Depression?
Tariffs and war debt policies that restricted American goods.
Crisis in the farm sector
The availability of easy credit
Unequal distribution of income.