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Questions and Answers
What were some of the causes of the economic downturn in 1929?
What were some of the causes of the economic downturn in 1929?
- Overproduction, bank failures, and tight monetary policy (correct)
- Low consumer demand, increased tariffs, and lack of investment
- Excess consumer spending, low interest rates, and reduced taxes
- High inflation, excessive government intervention, and weak international trade
What happened to workers when businesses needed to lay off employees?
What happened to workers when businesses needed to lay off employees?
- They increased their buying habits
- They received higher wages
- They lost their source of income (correct)
- They found new job opportunities easily
How did the reduction in consumer demand impact the economy?
How did the reduction in consumer demand impact the economy?
- It led to a surplus of goods and increased employment
- It caused an inflationary trend and higher wages
- It resulted in increased government spending and economic growth
- It led to more layoffs and a downward-spiraling economy (correct)
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Study Notes
The Great Depression
- 1929: The Great Depression was partly sparked by the stock market crash that began on "Black Tuesday," October 29.
- In the months leading up to the crash, stock prices were pushed higher and higher in a speculative frenzy, nearly doubling in value in just a year and a half.
- On Black Tuesday, panic rocked the stock market as stock prices plummeted, and continued to fall in the following months.
Stock Market Crash
- It wasn't until 1932 that the stock market hit bottom, with many stocks losing 90% of their value.
- Example: General Motors shares dropped from $73 to $8 per share between 1929 and 1932.
Economic Impact
- The stock market crash bankrupted many individual investors and collapsed corporate wealth.
- The broader American economy collapsed, with the U.S. economy shrinking by more than a third from 1929 to 1933, as measured by GDP (gross domestic product).
- Definition: GDP is the value of all goods and services produced in one country during a specific period, usually a year or part of a year.
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