what caused the wall street crash

Question 1

what caused the wall street crash - longer term

Answer 1

1. underlying problems
2. problems in farming
3. failure of republican policies
4. overproduction
5. poor income distribution

Question 2

underlying problems - problems in farming =

Answer 2

• too many crops so prices fell and farmers income dropped
• difficult for unemployed farmers to get jobs -> so a huge number of people couldn’t buy consumer foods so demand in factories fell

Question 3

underlying problems - what started failing in 1926 adn what did this mean

Answer 3

• building industry started failing
• as well as farming
  -> meant that workers in these jobs didn’t have money to buy consumer goods = demand dropped

Question 4

failure of republican policies/overproduction - what happened

Answer 4

• firms struggled to sell all the goods they made which caused falls in share prices
• europe had put up tarrifs in response to americas tariffs
• laissez faire - kept wages low so workers could afford goods

Question 5

failure of republican policies/overproduction - what failed when america raised tariffs on europe

Answer 5

• europe put tariffs on them in response
  -> so when america sales were falling they couldn’t sell abroad
  -» because europeans woulnd’t pay for expensive american imports

Question 6

poor income distribution meant that

Answer 6

• low wages couldn’t buy consumer goods on a large scale
• top 5 % of the country owned 33 % of the wealth

Question 7

poor income distribution - how much of the country owned what % of teh wealth

Answer 7

top 5 % of the country owned 33 % of the wealth

Question 8

what caused the wall street crash in the shorter term

Answer 8

1. over confidence
2. speculation

Question 9

how did overconfidence cause the wall street crash

Answer 9

• people though share values would keep going up
  -> soon shares cost more than they were worth
  -» when some companies made less money - some investors started sellign shraes and takin profits
  -»> caused a fall in prices and people selling shares = people lost money

Question 10

when did shares cost more than they were worth

Answer 10

October 1929

Question 11

how did sepculation cause the wall street crash

Answer 11

• banks were lending too much money to people to buy shares
• when prices fell people couldn’t pay back loans to the banks and lost everything

Question 12

what fact proves that banks where lending people too much money to buy shares

Answer 12

they leant out $ 9 billion in 1929

Question 13

what did the increase of buying on margin mean for banks

Answer 13

• banks would lend 90 % which would be repaid from share profits
• while investors only had to pay 10 %

Question 14

what happened in the wall street crash from sept - october 1929

Answer 14

• 24 october - lots of trading, big falls, banks intervene to buy stock, confidence returns
• 29 october - massive fall, people sell for whatever they can get