The Great The Great DepressionDepression

Causes of the DepressionCauses of the Depression

Overproduction in the 1920’sOverproduction in the 1920’s New technology and agricultural changeNew technology and agricultural change Unequal distribution of wealth (no buying Unequal distribution of wealth (no buying

power)power) Easy Credit ( many people bought on credit)Easy Credit ( many people bought on credit) Speculation in the stock marketSpeculation in the stock market Tariffs (Smoot-Hawley)Tariffs (Smoot-Hawley) Restricted money supplyRestricted money supply

Causes of the Dust BowlCauses of the Dust Bowl

Soil Erosion (overproduction) Soil Erosion (overproduction) Poor irrigation practicesPoor irrigation practices DroughtDrought

Causes of the New DealCauses of the New Deal

Role of the government in economy Role of the government in economy increased significantlyincreased significantly

The New Deal was a series of programs The New Deal was a series of programs and agencies designed to provide the and agencies designed to provide the American people with American people with ReliefRelief Reform Reform recoveryrecovery

Consequences of the Consequences of the Great DepressionGreat Depression

PoliticalPolitical Blame HooverBlame Hoover FDR elected (rise of democrats)FDR elected (rise of democrats) Rise of totalitarian governments Rise of totalitarian governments

WWII on the horizonWWII on the horizon

EconomicEconomic Unemployment rising (all over world)Unemployment rising (all over world)

Social Development Social Development Wider gap between status groupsWider gap between status groups

Consequences of the Consequences of the Dust BowlDust Bowl

PoliticalPolitical Subsidies of farmersSubsidies of farmers

EconomicEconomic Loss of income, “penny auctions”Loss of income, “penny auctions”

Social DevelopmentSocial Development 2.5 million people move because the region 2.5 million people move because the region

could no longer support the peoplecould no longer support the people

Consequences of the New Consequences of the New DealDeal

Political Political Direct governmental control in industry growthDirect governmental control in industry growth

EconomicEconomic Increased government role in the nations economy Increased government role in the nations economy

Ex SEC- regulates the stock marketEx SEC- regulates the stock market

Social DevelopmentSocial Development Fears of socialism Fears of socialism

some nations turn to socialism some nations turn to socialism countries like the US and Great Britain made changes with countries like the US and Great Britain made changes with

capitalistic systemcapitalistic system

Significance of the Stock Significance of the Stock Market SpeculationMarket Speculation

““buying on margin” buying on margin” when stock market crashed people and when stock market crashed people and

businesses lost all they had invested businesses lost all they had invested and borrowed still owed their lendersand borrowed still owed their lenders

Reasons for Federal Reasons for Federal ReserveReserve

Controls the flow of currency and Controls the flow of currency and establishes interest ratesestablishes interest rates

Impact of Federal ReserveImpact of Federal Reserve Impacts the well being of the US economyImpacts the well being of the US economy

Cost of car loans is influencedCost of car loans is influenced

What was the key reason What was the key reason for the creation of the for the creation of the Federal Reserve System?Federal Reserve System?

To promote economic stability To promote economic stability FRS regulates the amount of money in FRS regulates the amount of money in

circulationcirculation

One way the Federal Reserve System seeks to One way the Federal Reserve System seeks to influence the US economy is by raising or influence the US economy is by raising or lowering the rate of interest (discount rate) that lowering the rate of interest (discount rate) that member banks must pay to borrow money from member banks must pay to borrow money from the Federal Reserve the Federal Reserve Consider that the inflation rate rose significantly from Consider that the inflation rate rose significantly from

1976 to 1980, identify the change (increase or 1976 to 1980, identify the change (increase or decrease) the Federal Reserve system could have decrease) the Federal Reserve system could have made in the discount rate to reverse that trend.made in the discount rate to reverse that trend.

Describe the expected impact this change in the Describe the expected impact this change in the discount rate would have on discount rate would have on Consumer spendingConsumer spending Business spendingBusiness spending

Explain why this change in the discount rate would Explain why this change in the discount rate would produce the desired effects on spendingproduce the desired effects on spending

FRS could have raised the discount rateFRS could have raised the discount rate This leads to a decrease in consumer This leads to a decrease in consumer

spendingspending This leads to a decrease in business This leads to a decrease in business

spendingspending With less money in circulation, it would With less money in circulation, it would

lessen inflation and promote economic lessen inflation and promote economic stabilitystability

How did the US How did the US government’s role in the government’s role in the economy change as a result economy change as a result of the Great Depressionof the Great Depression

Federal government expanded its role in Federal government expanded its role in regulating economic activity promoting regulating economic activity promoting economic growtheconomic growth

If the US government If the US government wanted to encourage wanted to encourage businesses to hire more businesses to hire more employees, would the employees, would the government raise taxes or government raise taxes or lower taxes on lower taxes on businesses? Explain your businesses? Explain your answer.answer.

Lower tax ratesLower tax rates Businesses would have more money to Businesses would have more money to

hire employeeshire employees