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95 Cards in this Set
- Front
- Back
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What do most economists agree that the Great Depression began with?
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A recession caused by a fall in spending
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The cycle of the business boom led to what?
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A multiplier effect
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What is a multiplier effect?
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One person's spending becomes income to another person, who in turn can spend more and add to the income of others
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How can the multiplier effect work?
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In reverse
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What was the downturn of the economy beginning in 1929?
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Typical of a business cycle
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Black Tuesday was the single most __________ day in the history of the ____ ______ _______ __________.
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devastating; New York Stock Exchange
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What were previous economic downturns referred to as?
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panics
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Why did Hoover call this latest downturn a "Depression" rather than a panic?
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He was trying to downplay the problem, and the name stuck
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What economic problems in the U.S. exacerbated a host of social problems?
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-Unemployment and poverty
-Breakdown of families -Soaring high school dropout rates -Homelessness -Organized protest |
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What did the homeless call the settlements they had built out of cardboard and tar-paper shacks?
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"Hoovervilles"
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What was the Hooverville in sardonic reference to?
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President Hoover
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Why did farmers march on local banks armed with guns and pitchforks?
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They were trying to prevent foreclosures
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What were the two basic economic facts that soured the lives of average Americans?
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1) Unemployment
2) Inability to sell goods and services |
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Who did the American public find responsible for the Crash and the Depression? (Three B's)
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Bankers
Brokers Businessmen |
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What were the 8 roots of the Great Depression?
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1) Unequal distribution of wealth and income
2) Unequal distribution of corporate power 3) Bad Banking Structure 4) Global Depression due to WWI 5) Many countries owed us money after WWI 6) We placed high tariffs on imported goods 7) Limited or poor state of economic intelligence 8) Depressions are just going to happen |
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What does a slowdown in business activity begin with?
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A fall in demand for durable goods
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What are durable goods?
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Goods that are relatively expensive and don't wear out quickly
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What happened as durable goods began to wear out and prices fell due to lower demand?
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People began to buy again and the economy begins to recover
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Is this what happened in 1929?
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No
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What contributed to the falling demand of consumer goods?
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The crash in the stock market
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What do investors usually see lower stock market prices as?
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A buying opportunity
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Does the stock market recover at some point?
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Yes
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Did that happen in 1929?
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No
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What happened when many businesses and people were unable to repay their loans from 1930-1933?
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Banks closed in record numbers
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What happened when the banks fell?
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Depositors lost their money
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What happened to the money?
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It actually disappeared from the economy
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Who was supposed to lend reserves to banks in trouble?
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The Regional Federal Reserve Banks
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What happened too often with this?
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They would not lend to banks proven to be unreliable
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What happened when these banks failed?
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It caused the public to lose faith in banks and good banks began to fail
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What happened for 5 years prior to 1929?
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rising prices typified the stock market
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What happened during this period?
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American investors enjoyed an enormous "bull market".
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What is the opposite of a Bull Market?
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A Bear Market which is a market characterized by falling prices
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What were the 6 reasons that Americans invested in the stock market during the 1920's?
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1) Rising stock dividends
2) Increase in personal savings 3) Relatively easy money policy 4) Companies invested their over-production profits in new production 5) Lack of stock market regulation 6) Psychology of Consumption |
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What happened with rising stock dividends?
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New investors entering the market, many who viewed it as an easy way to get rich quick, helped inflate stock prices
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What happened with an increase in personal savings?
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Higher wages meant that even average Americans now had surplus money to put into savings or invest in the stock market
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Relatively easy money policy-
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At this time, banks made money more readily available at lower interest rates to more and more people
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What was over-producing from 1925 on?
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Industry
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What happened in anticipation of eventually selling the surplus?
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Business leaders funneled their profits right back into industry
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What did this increased production do?
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It gave the companies an aura and feeling of financial soundness
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What did this encourage Americans to do?
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Buy more stock
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What happened at the time when there was a lack of stock market regulation?
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There were no effective legal guidelines on buying and selling stock
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What did many investors in the stock market practice?
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"Buying on margin"
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What is buying on margin?
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Buying stock on credit
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What did an investor do when he was confident that a given stock's value would rise?
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He put a down payment on the stock
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What was the investor expecting?
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In a few months, he would pay off the balance of their initial investment while reaping a hefty profit
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What did the Psychology of Consumption feed?
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The optimism of investors
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What did the Psychology of Consumption give investors?
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Unquestioning faith in prosperity
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What did most economists believe in the 1920s?
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Not housing start, sales of durable goods, or the financial health of banks--- was the chief indicator of the fiscal health of the U.S.
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What did many of these analysts not realize?
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Stock prices were totally out of proportion to actual profits. Sales of goods and the construction of factories were falling rapidly while stock values continued to climb
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What did historians refer to October 24, 1929 as?
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"Black Thursday"
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What happened on Black Thursday?
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People began selling their stocks as quickly as they could
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What inundated market exchanges?
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Sell orders
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What did the Bull Market suddenly shift to?
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A Bear Market
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What happened on that evening?
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J.P. Morgan and other financiers bought up stock to stop the panic and keep the market afloat.
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What happened on October 25, 1929?
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the House of Morgan continued to keep the market stable and it seemed that the panic was over
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When did many investors begin to worry?
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During the weekend
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What did thousands decide to do?
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Sell whatever stock they still had as soon as the market opened on Monday
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What happened on October 28, 1929 as a result?
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There was another wave of sell orders
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What did October 29, 1929 become known as?
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Black Tuesday
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What was Black Tuesday the beginning of?
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The Great Crash
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What did former President Coolidge have to say about the economic health of the United States?
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"This country is not in good condition."
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What was the Bonus Expeditionary Force?
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A group of WWI veterans who had been denied their pensions
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What did the Bonus Expeditionary Force organize?
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They organized the first march on Washington in protest
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What happened in 1932?
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20,000 men set up a tent city
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What did these 20,000 men vow?
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They would stay there until they got their money
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What did President Hoover do about this incident?
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He overreacted and sent in the army to break up this peaceful demonstration
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Who led the army that President Hoover sent in?
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Douglas MacArthur and Dwight D. Eisenhower
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What are the stereotypical images of the depression enforced by the mass media?
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-Bread lines
-Hoboes hopping freight trains -College grads becoming gas station attendants(or enrolling in graduate school in record numbers) -Skyrocketing rates of suicide and mental illness -Former businessmen selling pencils or apples on street corners -"Okies" |
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What were Okies?
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Oklahoma farmers escaping the dust bowl for migrant farm work in California
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What novel were Okies most vividly portrayed in?
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John Steinbeck's novel-The Grapes of Wrath (1939)
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What do these stereotypes only depict?
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The experience of a small number of the American people
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What is the reality of long-term unemployment and day-to-day despair?
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Much less dramatic and thus more dismal
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What happened to income distribution despite rising wages overall?
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It was unequal
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What happened to gaps in income?
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They increased
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Where did gaps in income come from?
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The Gilded Age
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What happened to regular people, which was most of the people?
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They didn't have the spending power to boost the economy
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What did the tremendous concentration of wealth in the hands of a few mean?
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Continued economic prosperity was dependent on the high investment and luxury spending of the wealthy
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What went on from the late 1870s on?
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There was an ongoing movement of business consolidations and mergers in the United States
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What happened during WWI?
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Many potential commercial competitors merged into huge corporations and eliminated competition in major American industries
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What happened to banks in the 1920s?
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Banks were opening at the rate of four to five per day
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What were the 4 to 5 banks that opened up a day without?
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Many federal restrictions to determine how much start-up capital a bank needed or how much it could lend
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What happened to many countries after WWI?
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They were wiped out
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What were the two reasons that putting high tariffs on imported goods did not make sense?
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1) If they could not sell goods to us, then they would have a hard time repaying us
2) If they could not sell goods to us, then they had no money to buy goods from us |
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When did limited or poor state of economic intelligence take place?
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1920s and 1930s
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What did most American economists and political leaders in 1929 still believe in?
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Laissez-faire and the self-regulating economy
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What did President Hoover do to help the economy along in its self-adjustment?
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He asked businesses to voluntarily hold down production and increase employment
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Why could businesses not do this?
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They couldn't keep up high employment for long when they weren't selling goods
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What was there a widespread belief of?
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If the federal budget were balanced, the economy would bounce back
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What did it demand to balance the budget?
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No further tax cuts and no increase in government spending,
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What was this disastrous in light of?
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Rising unemployment and falling prices
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What was another problem with economic practices of the day?
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The commitment of the Hoover administration to remain on the international gold standard
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What did many analysts implore Hoover to do?
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Increase the money supply and to devalue the dollar by printing paper money not backed by gold
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How did President Hoover react to this?
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He refused
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What was going off the gold standard?
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One of Roosevelt's first actions when he entered the White House in 1933
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What are an inevitable part of the business cycle, just like up periods are?
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Down periods
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