The Great Depression

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Questions and Answers

What was the purpose of the Securities and Exchange Commission created during the New Deal?

To build dams for flood control and electrical power

To monitor the stock market and prevent risky trading practices (correct)

To provide insurance for individual bank accounts

To give jobs to men in the forest

What was the main objective of the Agricultural Adjustment Act during the Great Depression?

To build dams for flood control and electrical power

To pay farmers to not grow certain crops in order to increase prices (correct)

To give jobs to men in the forest

To monitor the stock market and prevent risky trading practices

Which New Deal program aimed to provide jobs in construction such as building schools, roads, and parks?

Civilian Conservation Corps

Federal Emergency Relief Agency

Tennessee Valley Authority

Public Works Administration (correct)

What was one of the lasting effects of the New Deal legislation related to banks?

Banks now have insurance to protect individual bank accounts Signup and view all the answers

What contributed to the over-speculation in the stock market during the 1920s?

Stock brokers guessing on stock prices Signup and view all the answers

What was the result of people buying stocks on margin during the 1920s?

Stock market crash Signup and view all the answers

What was the main reason behind the stock market crash during the Great Depression?

Stocks being purchased for a price higher than they were really worth Signup and view all the answers

What was the impact of the stock market crash on those who had bought stocks on margin?

They lost all their money Signup and view all the answers

What were some of the key programs and laws created under the New Deal to address the challenges of the Great Depression?

Some of the key programs and laws created under the New Deal to address the challenges of the Great Depression included the Tennessee Valley Authority, Civilian Conservation Corps, Agricultural Adjustment Act, Federal Emergency Relief Agency, and Public Works and Civil Works Administration. Signup and view all the answers

What was the purpose of the Securities and Exchange Commission established during the New Deal?

The Securities and Exchange Commission was established to oversee the stock market and prevent practices such as buying on margin and over-speculation. Signup and view all the answers

What was one of the lasting impacts of the New Deal related to banking and individual accounts?

One of the lasting impacts of the New Deal related to banking was the introduction of insurance to protect individuals' bank accounts, ensuring they did not lose all their money in the event of a bank failure. Signup and view all the answers

What event on October 29, 1929, is referred to as Black Tuesday?

The stock market crash due to mass selling Signup and view all the answers

What was a significant result of banks lending money to stock investors during the stock market boom?

Banks faced financial losses when investors couldn't repay loans Signup and view all the answers

What was one of the main factors leading to the inflated stock prices in the 1920s?

Speculation and buying stocks on margin Signup and view all the answers

Why did the stock market crash cause a run on banks?

Depositors feared losing their savings due to bank closures Signup and view all the answers

In what way did over-speculation contribute to the stock market crash?

Stocks were traded at prices much higher than their real value Signup and view all the answers

What ultimately happened to approximately 70% of banks in the USA by 1932?

They closed down due to financial insolvency Signup and view all the answers

What behavior did stock investors exhibit during the 1920s that was largely responsible for the stock market bubble?

Engaging in buying stocks on margin Signup and view all the answers

What did the widespread selling of stocks lead to on the stock market?

An unprecedented loss of investor confidence Signup and view all the answers

What was one consequence for families who could not pay their rent or mortgage during the Great Depression?

They faced eviction. Signup and view all the answers

What term was used to describe the homeless individuals who wandered around the country looking for work?

Hobos Signup and view all the answers

Which natural disaster significantly impacted farmers in the Midwest during the Great Depression?

Dust Bowl Signup and view all the answers

What happened to many farmers who migrated to California in search of work?

They faced hostility and low wages. Signup and view all the answers

How did living conditions for migrants in California affect their health?

They faced poor sanitary conditions leading to health issues. Signup and view all the answers

What was the purpose of the 'Bum Blockade' established by the Los Angeles police department?

To turn back migrants at the borders. Signup and view all the answers

What was the effect of overcrowding due to an influx of migrant workers in California?

Increased crime and need for law enforcement. Signup and view all the answers

What would happen to farmers' lands if they could not sell any crops during the Great Depression?

They had to forfeit their farms to the bank. Signup and view all the answers

What was the primary challenge faced by migrants when attempting to find work in California?

A saturated job market Signup and view all the answers

What contributed to the soil displacement during the Dust Bowl?

Uncultivated fields and drought Signup and view all the answers

What financial practice contributed significantly to the worsening of the Great Depression?

Buying stocks on margin Signup and view all the answers

What was the result of banks not having insurance on deposits during the Great Depression?

Depositors lost their savings when banks failed. Signup and view all the answers

Which of the following actions did President Hoover take in an attempt to combat the Great Depression?

Called upon business leaders to maintain employment Signup and view all the answers

What economic cycle was exacerbated by high unemployment during the Great Depression?

Vicious cycle of poverty Signup and view all the answers

What was a significant environmental disaster that affected farmers during the Great Depression?

The Dust Bowl Signup and view all the answers

What was one of the main goals of the New Deal programs initiated by President Roosevelt?

To provide immediate relief and recovery for the unemployed Signup and view all the answers

Which agency was created to oversee the stock market and prevent future financial crashes?

Securities and Exchange Commission Signup and view all the answers

Which law was introduced to pay farmers to limit production in order to raise crop prices?

Agricultural Adjustment Act Signup and view all the answers

What was one of the major consequences of high tariffs during the Great Depression?

Reduced consumer spending Signup and view all the answers

What nickname was given to makeshift housing areas built by homeless people during the Great Depression?

Hoovervilles Signup and view all the answers

Which program aimed at providing jobs to unmarried men and conservatively managed the national parks?

Civilian Conservation Corps Signup and view all the answers

What major misconception did people have about Hoover's policies during the Great Depression?

They believed he could solve the crisis through voluntary measures. Signup and view all the answers

How did the actions of the Federal Reserve during the Great Depression impact the economy?

By maintaining low loan rates for too long Signup and view all the answers

What was the key impact of the Relief programs established by the New Deal during the Great Depression?

Immediate assistance to unemployed populations Signup and view all the answers

How did over-speculation in the stock market during the 1920s contribute to the economic instability leading up to the Great Depression?

Over-speculation led to inflated stock prices based on unrealistic valuations, causing a crash when investors rushed to sell. This created a cycle of financial panic that eroded confidence and stability in the economy. Signup and view all the answers

What role did buying stocks on margin play in the stock market crash of 1929?

Buying stocks on margin allowed investors to purchase stocks with borrowed money, amplifying losses when prices fell. When the market crashed, investors were unable to repay loans, leading to widespread financial ruin. Signup and view all the answers

What were the consequences of the bank closures following the stock market crash?

Bank closures resulted in the loss of savings for many individuals, causing widespread panic and runs on remaining banks. By 1932, about 70% of banks in the USA had closed, deepening the financial crisis. Signup and view all the answers

How did the stock market crash affect the general public's trust in banks during the Great Depression?

The stock market crash eroded public trust as banks were unable to recover losses and many closed their doors. This led to a loss of confidence in the banking system, prompting people to withdraw their money en masse. Signup and view all the answers

What economic conditions existed in the 1920s that contributed to the stock market crash?

The 1920s were characterized by rapid economic growth, rising wages, and aggressive speculation in the stock market. This environment fostered inflated asset values and risky financial behaviors among investors. Signup and view all the answers

Why is October 29, 1929, historically significant in the context of the Great Depression?

October 29, 1929, known as Black Tuesday, marks the day when a massive sell-off of stocks led to a catastrophic crash in the stock market. This event triggered the onset of the Great Depression. Signup and view all the answers

Explain how the connection between banks and stock market investments contributed to the Great Depression.

Banks had invested depositors' money in the stock market, so when the market crashed, banks suffered significant losses. This interconnectedness led to widespread bank failures and further economic decline. Signup and view all the answers

What was the impact of the stock market crash on unemployment rates in the early 1930s?

The stock market crash led to a sharp increase in unemployment, as businesses closed and reduced their workforce due to financial instability. Millions found themselves without jobs, exacerbating the economic crisis. Signup and view all the answers

What were some of the challenges faced by homeless individuals during the Great Depression?

Homeless individuals faced starvation, eviction, and lack of shelter, often living in makeshift towns or on the streets. Signup and view all the answers

What role did soup kitchens and bread lines play during the Great Depression?

Soup kitchens and bread lines provided essential meals to jobless and hungry individuals, alleviating some effects of poverty. Signup and view all the answers

How did the Dust Bowl affect farmers in the Midwest?

The Dust Bowl led to crop failures and severe soil erosion, forcing many farmers to abandon their land and migrate elsewhere. Signup and view all the answers

Which term was used to describe migrants from Oklahoma seeking better opportunities in California?

They were known as 'Okies.' Signup and view all the answers

What legal measure was enacted in California to restrict the movement of migrants?

California's Indigent Act made it illegal to bring migrants, especially 'Okies,' into the state. Signup and view all the answers

What were 'ditchbank' camps and their impact on migrant workers?

'Ditchbank' camps were makeshift shelters along irrigation ditches where migrant workers lived, leading to poor sanitary conditions and health issues. Signup and view all the answers

How did the influx of migrant workers impact California's economy and society?

The influx led to overcrowding, increased competition for jobs, and strained public services, contributing to rising crime and taxes. Signup and view all the answers

What were the working conditions like for those who found jobs in California during the Great Depression?

Workers often toiled 16 hours a day for meager wages that barely supported their families. Signup and view all the answers

What were some key causes of the Dust Bowl phenomenon?

The Dust Bowl was caused by a combination of drought, high winds, and poor farming techniques. Signup and view all the answers

How did the Great Depression affect the mental health and resilience of individuals?

Many individuals faced despair, trauma, and humiliation due to their economic hardships and loss of stability. Signup and view all the answers

What role did installment plans play in the economic issues of the 1920s?

Installment plans allowed people to purchase expensive goods, but they led to increased debt, contributing to the economic collapse when people could no longer afford payments. Signup and view all the answers

How did President Hoover's initial response to the Great Depression influence public perception?

Hoover's attempts to maintain confidence and avoid direct assistance made many believe he was not doing enough, leading to significant public discontent. Signup and view all the answers

What impact did the Dust Bowl have on farmers during the Great Depression?

The Dust Bowl devastated crops and forced many farmers to abandon their land, worsening the economic conditions they faced. Signup and view all the answers

What were the effects of high tariffs on consumer behavior during the Great Depression?

High tariffs discouraged consumers from buying imported goods, leading to reduced overall spending and contributing to business layoffs. Signup and view all the answers

How did the Federal Reserve's low loan rates contribute to the economic crisis?

Low loan rates encouraged excessive borrowing and risky investments in the stock market, which ultimately contributed to the crash. Signup and view all the answers

What was the significance of soup kitchens and bread lines during the Great Depression?

Soup kitchens and bread lines provided critical food support for the unemployed and homeless, offering a lifeline during widespread poverty. Signup and view all the answers

What major environmental factor exacerbated the Great Depression for farmers?

A severe drought during the 1930s, resulting in the Dust Bowl, devastated agricultural production and worsened economic conditions for farmers. Signup and view all the answers

What was President Roosevelt's immediate action concerning banks when he took office?

Roosevelt temporarily closed all banks to prevent further failures and restore public confidence in the banking system. Signup and view all the answers

How did the Agricultural Adjustment Act aim to stabilize the economy?

The Agricultural Adjustment Act paid farmers to limit their production, which helped raise crop prices and improve farmers' incomes. Signup and view all the answers

In what way did the Reconstruction Finance Corporation attempt to address economic issues?

The Reconstruction Finance Corporation provided loans to struggling businesses and financial institutions to stimulate economic recovery. Signup and view all the answers

What was the significance of the term 'Hoovervilles' during the Great Depression?

Hoovervilles were makeshift towns built by the homeless, named after President Hoover, reflecting public frustration with his policies. Signup and view all the answers

What were some consequences of high unemployment during the Great Depression?

High unemployment led to increased poverty, loss of homes, and a significant drop in consumer spending, creating a vicious cycle. Signup and view all the answers

How did the New Deal change the banking system in the United States?

The New Deal introduced bank insurance to protect individual deposits, preventing total loss of savings in case of bank failures. Signup and view all the answers

What led to widespread bank failures during the Great Depression?

Investors withdrawing funds en masse due to loss of confidence caused many banks to collapse when they could not cover demands. Signup and view all the answers

Study Notes

Causes of the Great Depression

Overspeculation & Buying on Margin: Stock prices soared in the 1920s, fueling speculation and buying on margin, where investors borrowed money to buy stocks. This created an unsustainable "bubble" that burst on Black Tuesday (October 29, 1929) as stock prices plummeted.
Bank Failures: The stock market crash triggered widespread bank failures. Banks had loaned money to investors who defaulted on their loans, and had also invested depositors' money in the stock market, leading to massive losses. This sparked a "run on the banks", as panicked depositors withdrew their money, further exacerbating the crisis.
Overproduction & Falling Demand: Factories produced more goods than people could buy, resulting in a surplus of goods. Wage stagnation and installment plans had allowed consumers to buy expensive goods, but when economic uncertainty arose and wages were cut, people could no longer afford their purchases. This led to a vicious cycle of decreased production, layoffs, and further decline in demand.
High Tariffs & Protectionism: The government's high tariffs on imported goods discouraged international trade and further hampered economic growth.
Federal Reserve's Policy Mistakes: The Federal Reserve maintained low interest rates to encourage borrowing and spending, which fueled overspeculation and increased debt levels. When the bubble burst, the Fed's policies contributed to the severity of the downturn.

Effects of the Great Depression

Unemployment & Poverty: The Great Depression led to mass unemployment, with one in four Americans being unemployed and homeless. Businesses failed, and many lost their homes and jobs. This created widespread poverty and hardship.
Dust Bowl: A severe drought and over-farming practices in the mid-1930s led to the Dust Bowl, which decimated the agricultural industry and forced farmers to abandon their land. This exacerbated the Depression's effects on the agricultural sector, and led to migration from the Dust Bowl to California.
Social Consequences Impacting Migrants: Migrant farmers, particularly "Okies" from Oklahoma, faced hardship in California. They met with discrimination, low wages, poor working conditions, and hostility from locals who competed for jobs.
California & the Surge of Migration: Migrants faced difficulties finding work due to competition from established agricultural workers and faced hostility from locals. California's infrastructure was overwhelmed by the influx of new migrants, leading to overcrowding schools, increased crime, and tax hikes.

Government Responses

President Hoover's Efforts*
Voluntary Cooperation: Hoover urged businesses to avoid layoffs, but these efforts proved ineffective.
Public Works Programs: Hoover implemented public works programs to create jobs, such as constructing infrastructure like roads and bridges.
Financial Assistance: Hoover created the National Credit Corporation and Reconstruction Finance Corporation to provide financial assistance to banks and businesses, but these programs were often criticized as too limited and came too late.
Franklin Delano Roosevelt's New Deal*
Bank Holiday & Regulation: FDR closed banks temporarily to stabilize the financial system and establish the Federal Deposit Insurance Corporation (FDIC) to provide insurance for bank deposits.
Securities and Exchange Commission (SEC): The SEC was created to regulate the stock market and prevent future speculative bubbles and insider trading.
Key Programs:
- Tennessee Valley Authority (TVA): TVA built dams for flood control and hydroelectric power, revitalizing an impoverished region.
- Civilian Conservation Corps (CCC): CCC provided jobs for young men in conservation projects, such as forestry and park maintenance.
- Agricultural Adjustment Act (AAA): AAA paid farmers to reduce crop production, aiming to increase prices and stabilize farm income.
- Federal Emergency Relief Administration (FERA): FERA provided direct relief grants to states to assist the unemployed.
- Public Works Administration (PWA) and Civil Works Administration (CWA): PWA and CWA created construction projects to provide jobs in public works.

The Stock Market Crash

The 1920s saw a surge in stock prices, leading to widespread speculation and buying on margin.
Investors purchased stocks at inflated prices, borrowing money to finance their purchases, hoping to capitalize on rising markets.
When stock prices plummeted, investors couldn't repay their loans, triggering a cascade of bank failures and economic turmoil.
Black Tuesday, October 29, 1929, marked the crash of the stock market with massive losses for individuals, companies, and banks.

Bank Failures

The stock market crash triggered widespread bank failures across the US.
Banks had loaned money to investors, who were unable to repay due to stock losses.
Banks also invested in the stock market, losing depositors' money when it crashed.
Panic ensued, with people withdrawing their savings, leading to more closures.
By 1932, 70% of US banks had closed, leaving depositors uninsured and their savings lost.

Overproduction and Unemployment

Factories produced a massive amount of goods, many expensive and purchased on installment plans during the 1920s.
While factory owners prospered, wages for workers remained stagnant, reducing consumer spending.
The stock market collapse exacerbated consumer spending decline, leading to business losses, pay cuts, and mass layoffs.
This started a vicious cycle of reduced spending, factory closures, layoffs, and further diminished spending.
High tariffs discouraged international trade, further impacting industries and creating more unemployment.

Government Response

President Hoover initially downplayed the crisis and resisted direct government intervention.
He relied on voluntary efforts by business leaders to maintain employment and established government programs like the National Credit and Reconstruction Finance Corporations.
These programs were considered inadequate and too late to effectively mitigate the Depression.
Hoover was blamed for the economic crisis and lost the 1932 election.

The Dust Bowl

A severe drought from 1932 to 1937, coupled with over-cultivated farmland, resulted in widespread dust storms across the Great Plains.
Unclaimed land and the absence of crops allowed wind to whip up dirt, creating massive dust clouds that obscured the sun.
Farmers suffered crop failures, lost their land to foreclosures, and joined the ranks of unemployed migrants.

The New Deal

President Franklin Delano Roosevelt's New Deal program aimed to provide economic relief, recovery, and reform.
The Securities and Exchange Commission (SEC) was established to regulate the stock market and prevent future speculation.
The Federal Deposit Insurance Corporation (FDIC) was created to insure depositors' accounts against bank failures.
Other New Deal programs included public works projects, agricultural support, and unemployment relief.
The New Deal offered a significant response to the Depression, though its effectiveness is still debated.

Consequences of the Great Depression

Unemployment soared to unprecedented levels, with one in four Americans jobless.
Businesses and banks failed on a massive scale.
People lost their homes, savings, and dignity.
Soup kitchens and breadlines were established to feed the hungry.
Homeless communities, known as "Hoovervilles," sprung up across the country, blaming President Hoover for the situation.
Many people, unable to find work, became "hobos" and wandered the country, searching for opportunities.
Dust Bowl conditions forced many farmers to abandon their land and migrate West, particularly to California.

The "Okie" Migration

Migrants, particularly from Oklahoma, sought refuge in California, lured by supposed agricultural opportunities.
Often faced with hostility and discrimination, migrants found meager wages, harsh working conditions, and were turned away at state borders to prevent the influx of new workers.
Japanese, Chinese, and Mexican workers had already established a foothold in California's agricultural workforce, limiting opportunities for newcomers.
Migrants formed camp communities along irrigation ditches, struggling with poor sanitation, disease, and malnutrition.
In 1941, the entry of the US into World War II marked a turning point, as industries ramped up production and employment, ultimately helping to recover from The Great Depression.

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Test your knowledge of the causes of the Great Depression with this quiz. Explore the economic boom of the 1920s, the surge in stock prices, and the factors that led to the devastating economic downturn. Gain insights into the events that precipitated one of the most significant periods of financial hardship in U.S. history.