causes of the great depression mote. causes of the great depression depression- a period of low...

Causes of the Great Depression

Mote


• Depression- a period of low economic activity and wide-spread unemployment

• Underlying Causes or Fundamental Causes- develop and build up over a long time—it takes a long time before the effects are felt

• Immediate Cause- causes that come into being just before the major event itself occurs

Causes of the Great Depression• Overproduction• Laissez-faire• High tariffs• Industrial overproduction• Stock Market speculation• Bank Failures• Over-borrowing• Personal Debt• Stock Market Crash

Underlying Causes

Immediate Cause

Causes of the Great DepressionCauses

1.Overproduction- (farm)- farmers continued to produce more and more food due to technological advances like the tractor

• As production grew farm prices dropped (too much supply- not enough demand)

• Farmers reacted by boosting production even more

Effects

1. Farm produce prices plummeted (rapidly went way down)

2. Many farmers could not pay their loans on their farms

3. Banks foreclosed on many farms


• 2.Laissez-faire–(a French word that means – let do)

• was the American economic policy in the 1920s

• the belief that government should have a “hands off” approach to business

• **No Government Regulation**

Effects-Business was left alone- no

regulations-American businesses

reported record profits and production was at an all time high

-The rich got richer -The working class received

only a low percentage of the wealth

Causes of the Great DepressionCauses• 3.High tariffs• Europe was already in a

depression• US placed high tariffs on

European goods• coming into the United

States

Effects

• European countries reacted by placing a high tariff on US products entering into European countries

• International trade was at a standstill


• 4.Industrial overproduction-• American businesses were

producing far more than could be consumed

• Too much supply not enough demand

• some people had turned to installment buying

Effects

• loss of profits• many companies went out

of business• people laid off, lose jobs • Unemployment skyrockets• consumption continues to

decrease


• 5.Stock Market Speculation• Americans felt they were

going to be prosperous forever

• people began to increasingly invest in the stock market

• buy low –sell high

Effects

• The stock market began to rise in 1928

• On September 3, 1929 the market reached a record high

• then it began to decline• October 24, 1929 panic

selling began as 12.8 billion shares of stock changed hands


• 6.Bank Failures• People lined up to take out

savings to cover loans to buy stocks

• bank runs

Effects

• Loans were not being repaid• banks did not have enough

cash on hand• Over 5,000 banks closed by

1932• When a bank closed, the

depositors lost savings

http://www.youtube.com/watch?v=Fp1CttLLR0k





Causes

• 7.Over-borrowing• Investors had borrowed

money to buy stocks and now they could not pay their loans

Effects

• now investors could not pay for their original investments

• Many people run to the bank to withdraw money to pay off their loans


• 8.Personal Debt• Workers, being paid low

wages

Effects

• people bought on credit • they couldn’t repay


• 9.Stock Market Crash –October 29, 1929

• Black Tuesday• mass selling of stock

Effects

• Stock prices dropped severely

• Selling price was much less than purchasing price

• most stocks were worthless• people rush to the banks to

pay off loans and withdraw money

causes of the great depression mote. causes of the great depression depression- a period of low...

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