What two things did the federal
government do to try to help the
failing economy in the 1920s?
1. Raise interest rates
2. Hawley Smoot Tariff
Do Now:
What is a “depression”?
Now Do:
Is the United States experiencing
a depression right now (or have
we recently)?
Depression:
a sustained, long term
downturn in an economy; more
severe than a recession; a
decline in GDP* of more than
10% for more than a year
*GDP: the amount of goods/services
produced in a year
Objectives
-Define “depression” in economic terms
-Describe factors that led to the Great Depression
EQ:
How can economic excesses contribute to
hardship and instability in America?
Agenda
-Notes
-Skits
-Video Clip
The Business Cycle
 boom period of prosperity; business well above
normal. (Factories turn out large quantities of goods
and profits rise. Most people have jobs, and most
wages to increase.)
 panic period of uncertainty or fear followed by a
decrease in business activity. (The term "panic" has
sometimes been used to referred to as the start of a
depression.)
 depression business is far below normal. Production
decreases by 15% or more during severe depressions.
(This period is marked by high unemployment, a
decline in company profits, and a cutback in wages.)
 recession business is somewhat below normal.
(Employment, wages, and company profits are down,
but not as dramatically as during a depression.)
Identify the Boom, Panic, Depression
and Recession in this graph:
•A:
•B:
•C:
•D.
Recession
Boom
Panic
Depression
READING…
Use pgs. 464-471 in your textbook
to help you identify factors
contributing to the Nation’s Sick
Economy…
The Nation’s Sick Economy
Serious Problems in the Nation’s
Economy
Industry
 Key industries barely made a profit
 Some businesses fell behind
 Foreign competition
 New American technology
 Hawley-Smoot Tariff Act
 Highest protective tariff in U.S. history
 Declining demand for goods
 Coal industry declined because of new sources of
energy
 New housing starts declined
 Affected other businesses dependent on home
construction
Agriculture
 Demand for farms products fell
significantly
 Move from country to city=less need for
farming products
 Prices fell
 Farmers could not pay debts and lost farms
 Rural banks failed
Consumer Spending
 Easy credit
 Given out by businesses
 Encouraged consumers to pile up debt
 Consumer decreased purchases because
 Rising prices
 Stagnant wages
 High levels of debt
Distribution of Wealth
 Standard of living
 Half of America’s families did not make
enough
 Rich kept getting richer/poor getting poorer
 Most consumers had too little to spend
 Hurt American factories
Stock Market
 Investors
 Engaged in speculation
 Bought on margin (pay only a small percentage of
money owed for the stock)
 Brought the market upward
 Caused great wealth on paper
 Panic: Market crashed
 Investors lose everything
 Dow Jones Industrial Average plummets
 Measures the stock market’s health
 Black Tuesday
 October 29- The day the stock market crashed.
Black Tuesday
 October 29, 1929The day the stock
market crashed.