BOOM (Prosperity)

1
BOOM(Prosperity)
Stock Prices Soar in Unregulated Market Buying
on Margin, Insider Trading,
Businesses Expand Production Further
Federal Reserve Keeps Interest Rates Low Easy
Credit for Individuals Businesses
Businesses Expand Production Build More
Factories/Stores, Hire More Workers
High Consumer Spending (Cash in Victory Bonds,
Installment Buying)
Laissez-faire Gov. Policies Low Taxes
2
The Circular Flow of Economic Activity
Labor

Businesses (Producers/ Employers)
Workers/ Consumers

Products
3
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
4
Decline in Construction
5
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
6
Tariff Increases
Hawley-Smoot Tariff (1930)
October 1929 President Hoover publicly pledged
to sign the Hawley-Smoot Tariff which would raise
tariffs on some goods as high as 60.
7
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
8
The Stock Market Crash
October 24 Black Tuesday, Dow Jones Dropped
12.8 as 16.4 million shares were traded October
29 Black Thursday, Dow Jones Dropped an
additional 12, losing 14 billion in
value Total Losses were 30 billion in one week
(10 times the Federal Budget in 1929)
9
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
Stock Investors Cant Repay Loans to Banks
10
Bank Runs
Banks Only Keep a Fraction of Depositors Cash on
Hand Banks Cannot Give Everyone Their Money at
the Same Time
11
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
Stock Investors Cant Repay Loans to Banks
Bank Runs Occur as Banks Run Out of Cash
12
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
Stock Investors Cant Repay Loans to Banks
Bank Runs Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
13
Business Failures
14
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
Stock Investors Cant Repay Loans to Banks
Bank Runs Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
Businesses Fail
15
Unemployment
1/3 of the Nation Becomes Unemployed!
16
Bust(Great Depression)
Farmers Produce Surplus in 1920s Low Crop Prices
Decline in Construction of New Homes
Domestic Demand Begins to Drop
Investors Buy U.S. Stocks Instead of Lending to
Europe
Europeans Cant Afford to Buy American Products
Businesses Cut Back on Production Lay Off Workers
Domestic Demand Drops Even More
Businesses Overvalued Stock Market Crashes
Stock Investors Cant Repay Loans to Banks
Bank Runs Occur as Banks Run Out of Cash
Panicked Consumers Stop Spending/Investing
Businesses Fail
Unemployment Increases