This term is the name of the most widely used measure of the stock market's health.
Dow Jones Industrial Average
This term describes the setting of certain price levels at or above market levels by the government.
This term refers to paying a small percentage of a stock's price as a down payment and borrowing the rest.
buying on margin
This term refers to making extremely risky business transactions on the chance of making quick or considerable profits.
This reduced the flow of goods into the United States and prevented other countries from earning American currency to buy American exports.
Hawley-Smoot Tariff Act
This is an arrangement in which consumers agree to buy now and pay later for purchases, often on an installment plan that includes interest charges.
Critical Thinking Briefly answer the following question on the back of this paper.
Describe the fundamental problems in one of the following areas of the economy that helped to cause the Great Depression: industry, agriculture, consumer spending and debt, distribution of wealth, or the stock market.
Industry: Key basic industries barely made a profit; basic industries lost business to foreign and American competitors; housing starts fell, leading to decline in other businesses that depended on construction; decaying industrial base made some industries less competitive.
Agriculture: Soaring farm prices during World War I led farmers to go into debt in order to increase production; after the war, falling demand led to declining farm prices and farm income; farmers had difficulty paying off their debts; some farmers defaulted on their loans and lost their farms, and some rural banks failed.
Consumer spending and debt: By making credit easily available, businesses encouraged Americans to pile up a large consumer debt; faced with rising prices, stagnant wages, and high levels of debt, consumers decreased their buying.
Distribution of wealth: Nearly half the nation's families earned less than the minimum amount needed for a decent standard of living; in contrast, the rich got much richer; this unequal distribution of wealth meant that there was too little money in the hands of the vast majority of consumers.
The stock market: Many investors engaged in speculation and buying on margin, fueling the market upward and generating great paper wealth that had little relation to reality; when the bottom fell out of the market, many investors lost their life savings.
During the Great Depression, where would you have been most likely to find shantytowns?
on the outskirts of cities
During the Great Depression, why did people go to soup kitchens?
to get free food
During the Great Depression, why did people stand in bread lines?
to get free food
During the 1930s, what region became known as the Dust Bowl?
the Great Plains
At the beginning of the Great Depression, what were the main sources of direct relief?
some cities and charity services
Critical Thinking Briefly answer the following question. If you need more room, continue on the back of this paper.
Identify some of the physical and emotional health problems caused by the Great Depression.
Students should include points similar to the following:
The Depression led to an increase in malnutrition, starvation, and a variety of diseases associated with poor diets.
People who lost their homes took to living in shantytowns or on the streets and rails.
The hardship and suffering experienced during the Depression led to broken families, increased rates of suicide, mental illness, and general feelings of hopelessness.
Terms and Names If the statement is true, write true on the line. If it is false, change the underlined word or words to make it true.
One of Hoover's early efforts to jump-start the economy was a public-works program to build roads, dams, and other large projects. Among these projects was Shasta Dam, now called Hoover Dam.
False / Correct Answer: Boulder Dam
Congress passed the Federal Home Loan Bank Act to lower mortgage rates for home owners and allow farmers to refinance their loans and avoid foreclosure.
The Reconstruction Finance Corporation was intended to pump new life into the economy by providing emergency financing to various types of small businesses.
False / Correct Answer: large or big
Hoover's image suffered when he ordered the forced removal of 2,000 members of the Bonus Army-hoboes who had built a shantytown within sight of the Capitol building.
False / Correct Answer: (World War I) veterans
Compare President Hoover's response to the stock market crash of 1929 to his response to the Great Depression in the early 1930s.
In 1929, Hoover took a cautious approach, urging key business and labor leaders to find solutions and to act in ways that would not make the economic situation worse.
In 1930, Hoover began taking a more active approach. He directed federal funds into public-works projects, backed creation of the Federal Farm Board, persuaded the nation's largest banks to establish the National
Credit Corporation, and convinced Congress to pass the Glass-Steagall Banking Act, Federal Home Loan Bank Act, and the Reconstruction Finance Corporation.
All of the following preceded the onset of the Great Depression except
large industrial investments in new equipment.
During the 1920s, which of the following increased?
Who ran against Herbert Hoover in the 1928 presidential election?
Alfred E. Smith
What happened on Black Tuesday?
A record number of people tried to sell their stock.
Price supports are initially provided by
The Dust Bowl was caused by all of the following except
The Dust Bowl created a migration of people moving mainly
The phrase "buying on margin" refers to a way of purchasing
In calling shantytowns "Hoovervilles," people conveyed their
disgust with Hoover
Which of the following was an unintended effect of the Hawley-Smoot Tariff Act?
a substantial decrease in U.S. exports
The main purpose of the Federal Home Loan Bank Act was to
prevent farmers and homeowners from losing their property
The Bonus Army consisted of
World War I veterans and their families
Who ran for president in the 1932 election?
Herbert Hoover and Franklin D. Roosevelt
In what ways was the economic prosperity of the 1920s genuine, and in what ways did this prosperity disguise serious economic problems?
Signs of genuine prosperity included the facts that many people were making money on the stock market, that many people possessed a wealth of consumer goods, and that technological advancements had improved the quality and ease of everyday life.
The bull market disguised the fact that stocks were selling at prices far higher than the economic situation actually warranted.
The ease with which consumers bought goods on credit disguised the fact that most consumers couldn't actually afford their lifestyles.
The optimism of investors, industrialists, and politicians ignored the fact that many Americans were living in poverty or just getting by.
Write a paragraph describing some of the psychological effects--both good and bad--of the Great Depression.
Students should include some of the following points:
Widespread feelings of despair and hopelessness
Widespread feelings of shame and worthlessness
Increased rates of suicide and mental illness
Increased value placed on thrift and the importance of having financial security
Increased value placed on sharing and strengthening bonds with others
Increased feelings of responsibility for those whose situation was even worse than one's own
During the 1920s, stock prices rose because
investors were paying more for stock than it was actually worth
During the 1920s, which of the following was true of farming conditions?
More crops were produced than could be sold
Which of the following occurred first?
a decline in new house construction
Whose fortunes were most dramatically changed on the day known as Black Tuesday?
stock market investors
When did key American industries first begin showing signs of being in financial trouble?
in the years between World War I and the stock market crash
Price supports are intended to provide the most benefit for
What factors made the economy of the 1920s seem more prosperous and healthy than it was?
Consumer goods were available in abundance.
Farmers had been buying more land and more farm equipment and producing more and more goods for market.
Credit was easy to get.
The stock market was booming.
Average people were able to invest in the stock market.
People used credit to obtain higher standards of living than before.
Politicians and business leaders behaved as if the economy were doing extremely well
Write a paragraph describing how the Great Depression affected the daily lives of average Americans.
Students should include some of the following points.
People lost their jobs, and many spent years looking for new ones.
People lost their homes and farms.
People were forced to sleep in parks and alleys or makeshift shacks.
People were forced to scrounge for food, stand in bread lines, and eat in soup kitchens.
Minorities experienced more incidents of racial hostility and violence.
Some struggling families became closer in their misfortune; others disintegrated from the stress.
People worked together to share what little they had.
Women canned food for their families and sewed their own clothes.
Some people starved to death, while others died of preventable diseases, went insane, or killed themselves.
Many schools closed, leaving many children to fend for themselves on the streets or to go to work.
Which of the following is true of economic conditions in the 1920s before the stock market crash?
The rich got richer and the poor got poorer
Which investors were hurt the least by the stock market crash?
those who got out of the market before the crash
Who was president on Black Tuesday?
Who was most directly affected by the Dust Bowl?
Do you think Americans were justified in feeling that the actions Herbert Hoover took to end the Great Depression were too little and too late? Support your opinion.
Students who feel that Americans were justified might stress that Hoover: refused to provide direct relief. refused to use all of the federal government's power to fight the Depression. took dramatic action only after his reelection was threatened. initiated public-works programs that did little to change the economic situation. chose to focus on relieving the effects of the Depression on big business instead of on the average person.
Students who feel that Americans weren't justified might stress that: at that time, depressions were considered part of the ordinary economic cycle. Hoover could not have known how devastating the Depression would become. as the Depression went on, Hoover willingly took more drastic action. the Depression was caused by a number of factors that were beyond the control of Hoover or anyone else.
During the 1920s, approximately what percent of U.S. households earned less money than was considered necessary for a decent standard of living?
If someone bought one percent of the stock in a company in 1928, the chances are that the purchaser paid
much more than what one percent of the company was actually worth
During the 1920s, the main reason that U.S. industry couldn't sell all the goods it produced was that
consumers lacked sufficient buying power to purchase goods
By 1933, the unemployment rate had risen to
In a paragraph, explain one way in which each of the following groups was responsible for the conditions that led to the Great Depression-political leaders, business leaders, and common citizens.
Possible points regarding political leaders: Failed to regulate stock market speculation Failed to prop up the farm sector by setting price levels Failed to encourage businesses and citizens to behave more responsibly.
Possible answers for business leaders: Kept workers' wages too low. Unwisely encouraged consumers to buy on credit. Encouraged and engaged in stock market speculation. Failed to reinvest in their businesses by rebuilding decaying industrial bases. Unwisely allowed inventories to expand beyond demand.
Possible answers for common citizens: Used credit to live beyond their means. Speculated on the stock market. Overworked farmland and grew more crops, despite decreased demand.