Skeleton-Notes – Chapter 11, Section 1: Causes of the Great Depression
The Long Bull Market
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Big Ideas: Economic growth caused the stock market to rise steadily throughout the 1920s.
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This “bull” market enticed more Americans into buying stocks and taking more _____________ and not
always with their own money.
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The election of 1928
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Pres. Coolidge decided not to run for another term.
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Republicans nominated Secretary of Commerce Herbert _____________.
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Democrats nominated NY Governor Al Smith.
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Hoover won 444 electoral votes, Smith won 87.
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The American people were happy with the way things were going and chose to keep a _____________ in
the White House.
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Al Smith was the first _______________ to be nominated by a major party.
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Anti-Catholics ran ads that hurt Smith’s chances of being elected.
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The Stock Market soars
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The stock market was experiencing a _______________________, a long period of rising stock prices.
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Many people, believing the market would continue to rise, purchased stocks on _____________. That is, they
borrowed money from the __________________________ in order to buy the stocks.
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However, at any time the broker could make a __________________________ demanding the borrower pay
back their loan.
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If stock prices start to fall, a person who borrowed money to buy the stocks would need to sell quickly in
order to pay back the loan.
Many investors also engaged in ________________. They were betting on that the stock would go up without
considering the health or value of the company that issued the stock.
The Great Crash
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Big Ideas: During the boom times, many people made very _________ investments in the stock market expecting
that things would continue to go well.
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However, by 1929 professional investors smelled trouble and began pulling their money out.
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The Stock Market Crash
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Once people started selling, prices began to slip.
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People who borrowed money to buy the stocks began selling to pay back their _________________.
Skeleton-Notes – Chapter 11, Section 1: Causes of the Great Depression
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Stockbrokers began making margin calls to their customers leading to a selling frenzy as people scrambled to sell
while their stocks still had some value.
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October 29th, later to be called __________________________________, prices took a steep dive and the market
lost nearly $15 billion in value.
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By mid-November the market was down $30 _____________.
The Roots of the great depression
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Big Ideas: The Great Depression was not caused by any single event, but rather by a combination of government
____________________ and an uneven distribution of ____________________.
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The Federal Reserve failed to manage interest rates and kept them low.
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These low rates encouraged more borrowing and banks began making _______________ loans.
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Low rates made it easier for factories and farmers to expand their businesses even though there was no
need for more ____________________.
Because factories and farms were producing goods more ____________________, they were making more stuff
than Americans could afford to buy.
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Factory output increased by 32% while worker wages increased by 8%.
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Families did not have enough “extra” cash to buy everything being produced.
Factories began to slow production as their ____________________ filled with products they could not sell.
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As a result, they began laying off ____________________.
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Those workers could now no longer afford to make payments on the loans and
________________________________________where they put down some money for an item and
promised to make payments for the rest.
The other damaging factor was the fact that ____________________ could not afford to buy US goods because they
could not make any money selling goods to the US.
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The ____________________-____________________ Tariff raised the tariff rate making foreign goods too
expensive for Americans to buy.
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It also meant that Europeans would not buy US goods.
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Banks Begin to Close
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Banks were in big trouble after the crash.
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Banks had loaned $6 billion to stock __________________ who now could not afford to pay back the loans.
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Banks also lost money on their own investments.
Banks that lost too much of their customer’s deposits had to close their doors.
Skeleton-Notes – Chapter 11, Section 1: Causes of the Great Depression
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As news spread about bank closings, many people rushed to remove their money from their local banks in fear that
their own bank would close and leave them with ____________________.
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These “_____________________________” became a common occurrence.
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Banks loan money out, so if too many customers pull their savings out at once, the bank could be ruined.