Chapter 8 The Great Depression Essential Question How

Chapter 8 - The Great Depression Essential Question- How did the collapse of the economy impact the United States?

I- The Stock Market Crash • A) The Stock Market (Wall Street) • 1) Buy shares of a company • 2) If the company does well, the stock price goes up. You can sell the stock for a profit or hold onto it and hope for more gains

• 3) If the company does poorly the stock price goes down • a) You can sell it at a loss or hold onto it and hope it gets better (could get worse)

B) Bad Investments • 1) During the 1920’s, many people began speculating on stocks • a) Speculationinvesting or buying without sound (good) business principals or practices

• 2) Many investors also bought stock ON MARGIN • a) On Marginusing borrowed money to buy stocks

• 3) In 1929, stock prices had risen 400% over five years. • a) In the end of 1929, investors stopped buying stocks (due to high prices and fear)

D) The Crash • 1) Banks begin to call in their margins (want their loaned out money back) • 2) No one could sell their stocks (no buyers) • 3) No buyers= no money= no way to pay margins

• 4) Oct 29, 1929 Investors desperately try to unload stocks. Investors begin to panic. • 5) No one is buying any stocks? • 6) Stock prices fall drastically

• E) Many companies go instantly bankrupt. • 1) Many banks collapse due to no payment on loans • 2) Stocks become worthless pieces of paper