The Great Depression

1930s

Circular Flow Model

Do Now: With a partner, complete the circular business cycle flow chart by placing the letter on the arrow it corresponds. You may use a letter more than once.

Business circular flow chart.docx

Ms. Sanyigo’s Roller Coaster Ride

The Business Cycle:

Stock Market

In the 1920s:-What is stock?-You are investing in a company-The company uses the money to

expand or grow.

Stock Market

In the 1920s:-Buy on Margin: when

people buy stock they borrow 20% or more of the money

Example-Stock is $10 you pay $2 and borrow $8

-Speculation: taking a risk in the stock market

The Stock Market In the 1930s:-October 24, 1929 : stock

prices start to drop so people start to sell their stock-October 29, 1929 Black Tuesday: a million shares are sold by November there is $30

billion in loses***Remember people

OVERSPECULATED & BUY ON MARGIN!

Who cares????? If decrease stock

value then businesses have less money to invest!

How does this affect everything else?

Manufacturers/Business In the 1920s:-production decreases after

WWI-so businesses come up with

new inventions to increase production

-unemployment is less than 4%

BUT by 1925 everyone has what they need….SO…

Manufacturers/Business In the 1930s:-Surplus-begin laying off workers or

cutting pay-Stock market crash hurts

business

How does one business affect another?

Ex: auto industry-if produce less than steel, glass, rubber companies produce less

-this effects the workers!

Workers In the 1920s:-people spend after the war

but much is paid for on credit-buy now, pay later

-pay decreased but prices are still high

-pay in installment plans: in monthly payments for large items

Workers In the 1930s:-business decreases so workers take pay cuts or are laid off-owe debt from credit can’t pay back-no unemployment insurance-some families start living together-unemployment hits 25% in 1933 approximately 13 million

people

Banks In the 1920s:How do banks

work????

-Only 20% of families have savings

-Rural (farm) banks suffer more than banks in city areas

Banks In the 1930s:-Businesses, Farmers,

Workers can’t pay back their loans

-Banks lose money and close

-5,500 go under because they have no money to loan

-by 1933 9 million savings accounts are gone

Farmers

In the 1920s:-decrease production

(making things) after the war and Prohibition (no alcohol)

-have surplus (too much left over), crop prices low

-can’t repay loans

Farmers In the 1930s:-Dust Bowl: drought in

Midwest (no rain)-lose farms because they

can’t repay their mortgage or debt from buying new equipment

-become migrant workers (move around) looking for work called “Okies”

-some become sharecroppers (share farms)

Women In the 1930s: -husbands leave

looking for work-lose jobs to men-try to hold the family

structure together-marriage rate &

divorce rate decreases

African Americans In the 1930s:-increased

discrimination due to competition for jobs

Scottsboro Boys: wrongly accused of a crime on a train

-Showed discrimination in the justice system