Unit 5 Lesson 5: Entering the Great Depression Flashcards
Did Hoover see any signs of the econmic downfall?
No; When Hoover took office in 1929, he saw a growing economy. Along with most of the nation’s leaders, he did not recognize the signs of trouble.
What did Hoover realize?
Hoover did realize that some Americans had not shared in the prosperity of the 1920s. As you have read, farmers already faced hardship in the 1920s. So did workers in the textile and coal industries. For workers in those industries, a booming economy was something they only read about in the newspapers. The words on a Pennsylvania mining town tombstone reflected their feelings of frustration.
Which workers suffered the most duing the proserpus era?
farmers coal and textile workers
What led to many people selling their stock in 1929?
By August 1929, some investors worried that the boom might soon end. They began selling their stocks. In September, more people decided to sell. The rash of selling caused stock prices to fall. Hoover reassured investors that the “business of the country … is on a sound and prosperous basis.” Despite the President’s calming words, the selling continued and stock prices tumble
Why did investors sell thieir stock? How did margin have a role in this?
Many investors had bought stocks on margin. Buyers of stocks on margin pay only part of the cost of the stock when they make the purchase. They borrow the rest from their stockbrokers. With prices falling, brokers asked investors to pay back what they owed. Investors sold their stock to repay their loans.
A panic quickly set in. Between October 24 and October 29, desperate people tried to unload millions of shares. What did this result in
As a result, stock prices dropped even further.
What was black tuesday? When did it take place?
When the stock market opened on Tuesday, October 29, a wild stampede of selling hit the New York Stock Exchange. Prices plunged because there were no buyers. People who thought they owned valuable stocks were left with worthless paper.
What was the great depression?
The period of economic hard times that followed the crash is known as the Great Depression. It lasted from 1929 to 1941.
How did overproduction incerase the gap between the rich and poor?
Among the chief causes of the Great Depression was overproduction. American factories and farms produced vast amounts of goods in the 1920s. Vast corporate profits made from increased production were not passed on to workers. As a result, the gap between rich and poor widened with the middle class slipping into poverty. In fact, over one third of American assets were owned by one percent of Americans—those with the most money.
Having such a small number of people in control of so much wealth contributed to an economic slump. First, the wealthy were more likely to save the money than spend it like those who were less wealthy. Second, those who were less wealthy saw their buying power fall.
What led workers to lose their jobs?
Because wages did not keep up with prices, workers could not afford to buy the goods that corporations continued to produce. Factories and farms were producing more goods than people were buying. As orders slowed, factories laid off workers.
How did weakness in the banking system cause the great depression?
Another cause of the depression was weakness in the banking system. During the 1920s, banks made unwise loans. For example, banks lent money to people who invested in the stock market. When the stock market crashed, borrowers could not repay their loans. Without the money from the loans, the banks could not give depositors their money when they asked for it. As a result, many banks were forced to close.
What happened when banks closed?
More than 5,000 banks closed between 1929 and 1932. When a bank closed, depositors lost their money. Often, a family’s lifetime savings disappeared overnight.
How did the stock market crash ruin many investors?
One disaster triggered another. The stock market crash, for example, ruined many investors. Without capital, or money, from investors, businesses could no longer grow and expand. Businesses could not turn to banks for capital because the banks were also in trouble.
How did the cut back on production led to the lay off of workers?
As factories cut back on production, they cut wages and laid off workers. Unemployed workers, in turn, had little money to spend, so demand for goods fell further. In the end, many businesses went bankrupt—they were unable to pay their debts. As bankrupt businesses closed, even more people were thrown out of work.
How did the Great Depression led to a worldwide economic crisis?
The Great Depression led to a worldwide economic crisis. In the 1920s, the United States had loaned large sums to European nations. When American banks stopped making loans or demanded repayment of existing loans, European banks began to fail. The depression spread from nation to nation. By 1930, it had led to a worldwide economic collapse.
