Unit 2: The Great Depression & World War II
Topic 1: The Great Depression
What caused the Great Depression?
‐‐‐‐What were the weaknesses in the 1920s economy?
‐‐‐‐How did the stock market crash of 1929 contribute to the G.D.?
‐‐‐‐Why did the GD go global and what affect did that have on the U.S.?
How did the Great Depression affect Americans?
‐‐‐‐How was the effect different in the cities and the rural areas?
‐‐‐‐What was the effect on women? minorities? children?
Why did President Hoover's policies fail to solve the economic crisis?
‐‐‐‐Why was President Hoover reluctant to interfere with the economy?
‐‐‐‐What measures did he take initially? How did his approach change over time?
Our story begins in here:
quot;By adherence to the principles of decentralized self‐government, ordered liberty, equal opportunity, and freedom to the
individual, our American experiment in human welfare has yielded a degree of well‐being unparalleled in all the world. It has never
come nearer to the abolition of poverty, to the abolition of fear of want, than human has ever reached before.quot;
‐‐‐Herbert Hoover, 1928
But to understand our story, you need to consider the context:
What developments/event characterized the 1920s?
You also need step into Herbert Hoover's head and view the world from his perspective.
To do this, we need to know more about his view of the economy.
Lesson #1: Supply and Demand
If the supply of goods increases and consumer demand stays the same, prices will drop.
If consumer demand increases and the supply remains the same, prices will rise.
If Asics makes too many shoes and they aren't selling, what should Asics do?
Lesson #2: Say's Law (1920s)
Surplus will always disappear because prices will come down until everything gets
3G iPhones = $300
Apple has a surplus of 1 million iPhones.
Consumers (who have maxed our their credit cards) aren't buying.
According to Say's law, what will Apple do?
Lesson #3: the Business Cycle
Peak Peak Peak
Decling Production Trough Rising Production
Declining Employment Rising Employment
Declining Incomes Rising Incomes
Problems in Uneven Distribution
Agriculture of Wealth
Causes of the Great Depression
Stock Market Crash
Commercial Banks Fail
Tariff Makes Things Worse
Result: Global Depression by 1932
• GDP down between 1/2 and 2/3rds from 1929
• Construction expenditures down 70%
• Investments rates down 98%
• Unemployment = 25%
How did President Hoover approach the Great Depression?