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The causes of the great depression. Wait… what’s the great depression?. The great depression. Date: 1929-1939 Definition: a period of economic depression in the United States and the rest of the world - PowerPoint PPT Presentation
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THE CAUSES OF THE GREAT DEPRESSION
WAIT… WHAT’S THE GREAT DEPRESSION?
THE GREAT DEPRESSION
Date: 1929-1939 Definition: a period of economic depression in
the United States and the rest of the world Economic depression occurs when an
economy produces fewer goods and services and employs fewer people
Significance Huge cost to human well-being Transformed the role of the US federal
government in people’s daily lives
FIVE LONG-TERM CAUSES OF THE GREAT DEPRESSION
Monetary policyOverproduction Inequality SpeculationTrade
Day 1
Day 2
Day 3
Day 4
DAY 1: OVERPRODUCTION AND INEQUALITY
OVERPRODUCTION
In your notes: Is it possible for an economy to produce too much stuff? What might be the positive and negative consequences of producing too much?
MARKET SIMULATION
Some of you are producers – your job is to sell golf pencils (provided by me) for as much profit as possible
Some of you are consumers – your job is to buy golf pencils from the producers for as little money as possible
Some of you are observers – be ready to answer questions on the worksheet
ROUND 1
One producer with one golf pencil to sellFive consumers, with budgets of 20 cents each
ROUND 2
Two producers with five golf pencils eachFive consumers with budgets of 20 cents each
ROUND 3
Ten producers with ten pencils eachThree consumers, with budgets of 5-25 cents each
ROUND 4
Two producers with five golf pencils eachTen consumers
Eight consumers get two cents eachTwo consumers get 50 cents each
ROUND 5
Five producers with five golf pencils eachTen consumers
Eight consumers get two cents eachTwo consumers get 50 cents eachBut consumers are going to get some bad news
before buying begins…
SO WHAT DOES THIS HAVE TO DO WITH THE DEPRESSION?
BASIC ECONOMIC PRINCIPLES
Prices are set by the combination of supply and demandWhen demand > supply, prices go upWhen supply > demand, prices go down
The balance of power depends on the distribution of wealth When wealth is equally distributed, individual crises (like
tuition or medical bills) don’t hurt the economy much When wealth is heavily concentrated, a crisis for the rich
means a crisis for the whole economy
OVERPRODUCTION IN THE GREAT DEPRESSION
Agricultural overproductionFarmers increased production significantly during WWI – and
took on huge debts to do thisAfter WWI ended, demand fell sharply and farm prices crashed Individual farmers kept production high, since profits were low
Similar problem in industry – factory methods made production increase, but eventually Americans ran out of money for new goods
INEQUALITY IN THE 1920S
In the 1920s, the rich became far richer while the poor became only slightly less poor
Made worse by tax cuts for the rich under Herbert Hoover
Result: limited demand for consumer goods
EXIT TICKET
1.How did overproduction make the American economy unstable in the 1920s?
2.How did inequality make the American economy unstable in the 1920s?