Causes of the Great Depression

1. What industrial weakness signaled a declining economy in the 1920s?    
The industrial weaknesses that signaled a declining economy in the 1920s were the struggling of important industries, the surplus-without-profit situation of farmers, and the debt that consumers and farmers were going into.


2. What did the experience of farmers and consumers at this time suggest about the health of the economy?    
The experiences of farmers and consumers at this time suggested that the health of the economy was diminishing. Farmers needed federal price-supports in order to keep agriculture from going under since they had an abundance of products but a drop of the annual farm income. Consumers had less money to spend on goods because their incomes had been reduced and prices had been increased. Both farmers and consumers were faced with the effects of the previous years that were full of superficial prosperity in the economy.



3. How did speculation and margin buying cause stock prices to rise?    
Speculation and margin buying caused stock prices to rise because more and more people were mindlessly buying and selling stocks, and with these limitless investments the stock market rose on a steady incline. Also, there was barely any regulation by the government in the stock market, so the speculation and margin buying was a bit relentless.

4. What happened to ordinary workers during the Great Depression?    
Many ordinary workers lost their jobs. For the workers that managed to still have a job, they dealt with pay cuts and less working hours.


5. How did the Great Depression affect the world economy?    
The Great Depression caused Congress to pass the Hawley-Smoot Tariff, which caused other countries to raise their tariffs, and therefore the world trade market fell by more than 40%. Also, Britain and Germany were dealing with big debts from the war, and their problems mixed with America's inability to import European goods, limited trade as a whole in the world economy.


Define: 

a. Price-Supports: When the government would buy products, at a set price, that were in surplus and sell them on the world market; those were called price-supports.

b. Credit: A system in which consumers agreed to "buy now and pay later" for products.

c. Dow Jones Industrial Average: The most popularly used barometer of the stock market's health.

d. Speculation: When people carelessly bought stocks and bonds hoping for a quick profit.


e. Buying on Margin: When a consumer would make a down payment for a small amount of a stock's price, and then take up a loan for the rest.


f. Black Tuesday: October 29, 1929-the day when the stock market truly fell. 


g. Hawley-Smoot Tariff: Passed by Congress in 1930, it is the highest protective tariff in all of U.S. history. It was meant to help protect American farmers and manufacturers from foreign competitors, but it ended up having the opposite, negative, effects. It made unemployment worse in America, and caused other country to raise their tariffs, ultimately hurting world trade.