Causes of the Great Depression

1. What industrial weakness signaled a declining economy in the 1920s?    
The industrial weakness that signaled a declining economy in the 1920s was that not many houses were being built.  This added to the decline in the lumber industry, which was already declining along with the mining industry because of the war being over and new forms of energy being introduced.  Also, the decrease in houses being built led to furniture not being made, so that industry suffered as well as the automobile, textile, and rail road industries.  However, the decrease in the building of houses was the indicator of the declining economy.

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 suggest that the economy was not doing well.  For the farmers, the annual income dropped by 60% because the war had ended, so there was less of a demand.  However, the farmers will still producing the same amount, so the high supply and low demand led to a huge drop in prices.  Therefore, farmers were making less and could not pay back the money they had borrowed so that they could produce more during the war.  There suffering shows that the economy was not doing well.
The experiences of consumers also shows that economy was not doing well.  Consumers were not able to buy as much because salaries were not increasing, so they did not have very much money to spend, but prices were.  The consumers not buying items is an indication of this as well as an indication that teh economy was snot doing well.


3. How did speculation and margin buying cause stock prices to rise?    
Speculation and margin buying caused stock prices to rise by not giving an accurate estimate of a company's worth.  This is because buying stocks was very easy because, with speculation, one could just buy bonds and stocks while hoping for an easy and quick profit.  Then when this speculation was done by margin buying, so only a small amount of money used to pay for the stock was their own and the rest was borrowed.  This led to increases in amount of stocks bought, so companies appeared to be worth more than they actually were, so stocks cost more.

4. What happened to ordinary workers during the Great Depression?    
Ordinary workers during the Great Depression suffered.  It is clear that many people lost their jobs when many businesses failed because the unemployment increased by 11 million people.  Even those who were able to keep their jobs suffered because there wages and hours were cut.  Also, everyone suffered when the banks closed because many were not able to ever get their money out of the banks again.  Clearly ordinary workers suffered during the Great Depression.

5. How did the Great Depression affect the world economy?    
The Great Depression affected the world economy. This is because the countries of Europe were already having issues while they tried to recover from World War I.  Then, when the Great Depression hit America, the Hawley-Smoot Tariff was put in place and this was meant to make foreign good expensive so Americans would buy American goods.  This hurt Europe because European goods were not being bought by Americans and also because Europe's ability to purchase American goods.  So the introduction of this tariff, brought on by the Great Depression, affected other countries.

Define: 

a. Price-Supports:   
Price-supports are when the government promises to by extra items, crops under the McNary-Haugen bill, at a set price.  The government then sells them on the level of the world market.

b. Credit:   
When an item is not paid for immediately, but a promise is made by the buyer to pay for it slowly, like in the form of money every month.

c. Dow Jones Industrial Average:    
The Dow Jones Industrial Average is found when there are thirty large companies that represent the stock market and the average that they make or lose is derived.  This is the Dow Jones Industrial Average and it is used by many to find out how the stock market and economy are doing.

d. Speculation:   
Speculation is when people just try and make money quickly by taking a risk and buying a bond or stock.  This is quick, but a risk.

e. Buying on Margin:    
Buying on Margin is when one buys stock, but only pays for it with a small amount of their own money and borrows the rest of the money needed to pay for it.

f. Black Tuesday:    
On Black Tuesday the market was starting to crash, so people sold their stocks before their prices could go any lower.  This led to a larger crash and 16.4 million stocks being dumped that day.

g. Hawley-Smoot Tariff:   
This was a very high tariff, tax on imported goods, put in place in 1930 that was supposed to increase the consumption of American goods. However, this also ended up not letting Europeans buy American goods and not letting America export goods.  Therefore, the companies that exported goods either failed or had to fire many employees.