THE GREAT DEPRESSION Causes Effects Legacy The Great

THE GREAT DEPRESSION Causes, Effects, Legacy

The Great Depression ■ Economic crisis during the 1930 s lasting about 10 years ■ Began in U. S. with subsequent impacts throughout the world ■ Sharp increases in unemployment, poverty, homelessness, farming failures ■ Precipitated innovative recovery measures and legislative protection

The Great Depression ■ Causes – Stock Market Crash of 1929 ■ ■ Rising stock prices during the 1920 s Unregulated market Perceived easy way to make money Borrowing or mortgaging to buy shares – ■ Margin: purchase price financed with loans to be repaid with profits generated by increasing share price Decline of stock prices in October 1929 – – Shareholder panic – rush to liquidate holdings Exacerbated decline in prices and resulted in further panic

The Great Depression ■ Results – Stock Market Crash of 1929 ■ ■ ■ Psychological shock and loss of confidence in the economy Consumer spending declined Business investment reduced Reduced industrial production Job losses Farmers hit particularly hard – – Declining prices for farm goods Great Plains ‘Dust Bowl’

The Great Depression ■ Remediation – Change of Presidents ■ Herbert Hoover was President of the United States in 1929 – – – Many blamed Hoover for the Great Depression Shantytowns where homeless lived were called ‘Hoovervilles’ Perceived as ineffective in dealing with the crisis

The Great Depression ■ Remediation – Change of Presidents ■ Franklin D. Roosevelt elected President of the United States in 1932 – Promised the people of America a ‘New Deal’ ■ New Deal: series of laws, programs, and government agencies enacted to help the country deal with the great Depression ■ Placed regulations on the stock market, banks and businesses ■ Many of the measures and laws are still in place today (i. e. Social Security, SEC regulations) ■ The New Deal did not end the Great Depression but alleviated its impacts

The Great Depression ■ Legacy – The Great Depression ended with the start of World War II and the resulting wartime economy ■ New Deal-related legislation increased the role of government in everyday life ■ Efforts of agencies such as Public Works Administration significantly improved the infrastructure of the country with the construction of roads, schools, bridges, parks and airports.

The Great Depression ■ Interesting Facts about the Great Depression – Stock market lost 90% of its value between 1929 and 1933 – 11, 000 banks failed during the Great Depression – Unemployment in 1929 was 3%; in 1933 it was 25% – The average family income dropped by 40% during the Great Depression – More than $1 B in bank deposits were lost due to bank failures/closures – The New Deal created about 100 new government offices and 40 new agencies – At least 300, 000 companies went out of business – Hundreds of thousands of home foreclosures occurred – Millions migrated from the Dust Bowl Midwest; 200, 000 of those moved to California – President Roosevelt pushed 15 major laws through in his ‘First Hundred Days’ in office

The Great Depression ■ Measuring the Great Depression – Economic Definitions – Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. – Deflation is a general downward movement of prices for goods and services in an economy. – Depression is a very severe recession; a period of severely declining economic activity spread across the economy (not limited to particular sectors or regions) normally visible in a decline in real GDP, real income, employment, industrial production, wholesale-retail credit and the loss of the overall confidence in the economy.

The Great Depression ■ Measuring the Great Depression – Economic Definitions – Inflation is a general upward movement of prices for goods and services in an economy. . – Nominal Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a year. – Real Gross Domestic Product (GDP) is the production of all final goods and services within a country valued at constant prices (i. e. , adjusted for inflation or deflation). – Unemployment rate is the percentage of the labor force who are unemployed.