BELLWORK1. List three factors that contributed to economic growth in the

1920’s.

2. What is consumerism?

3. What are the pros/cons of buying on credit?

4. Explain Lassiez-Faire economic policies. Why would the government support this?

5. THINKER: How do stocks work?

6. THINKER2: Do you have a savings account? Why do banks pay interest on savings?

Buying on Credit

How do stocks work?Companies are made up of stocksStocks (shares): small portions of the company that

can be bought and sold for a given amount of money.When a company does well (makes a profit), the stock

increases in value.When a company does poorly (loses money), the

stocks decrease in value.The Stock Market: the place where stocks are bought

and sold.

Current Share Prices AT&T: $35.17 Visa: $211.43 Chevron: $116.58 McDonalds: $94.83 Nike: $89.39 Apple: $99.78 Google: $575.51 These share prices are constantly changing……why?

STOCK VOCABULARY

Speculation - Making high risk investments with the hope of huge returns.

“Have to bet big to win big”

THE CASE OF CIRCUIT CITY Opened in 1949 as a retailer of brand-name electronics,

computers, and entertainment systems. Joined the stock market in 1984 – fairly successful 2003: eliminated commission sales, 4000 employees laid off As of 2005, Circuit City held $1 billion in investments 2007: Management Turnover, 3500 more jobs lost 2008: CEO resigned, closed 155 stores, laid off 17% of workers 11/10/08: filed for Bankruptcy, $2.32 billion in debt 1/16/09: announced they were closing all stores

•Roller coaster notes!•Coincides with page 182 in your HOA textbook

Discuss: What contributed to economic growth in the 1920’s?

BELLWORK 10/7 What was the problem with large investors buying

a huge portion of stock? What could go wrong? What is the purpose of the Federal Reserve

Bank? Why did it fail in the year prior to the Stock Market Crash?

List three factors leading to the Crash that showed signs of economic trouble ahead.

Signs of an “unsound economy” Uneven Prosperity

Tax cuts to wealthy Rich get richer & poor get poorer

Personal Debt Luxury items seem affordable with credit Not everyone could pay it off

Playing the Stock Market Speculation: high risk investments for a big return Buying on margin: bought portion of stock & borrowed the rest High interest rates

Overproduction Originally high demand, but now, too much product Companies lost a lot of product and money

All these factors combined until October 29, 1929 when. . . . . .

THE STOCK MARKET CRASHED!!!!

BLACK TUESDAYInflated stock prices began to fall at a rapid

rate.16.4 million shares were immediately soldSold at much lower prices than for what they

were bought= huge financial losses for sellers.Sends economy into a downfall.http://www.youtube.com/watch?v=RJpLMvgUXe8

Make a prediction……..Now that the STOCK MARKET has

crashed…Think about what effects this event might

have on:People buying goodsPeople producing goodsEmployment

IMMEDIATE RESULTS#1 - Massive selling of stocks All sold for low prices.Many investors lost tons of money.

IMMEDIATE EFFECTS#2- Lack of Buying-People begin to worry about their money.

Stop buying manufactured goods- try to hold onto what money they have left.

IMMEDIATE EFFECTS#3- Lack of production-Since people stopped buying goods, companies stop producing goods.

Economy is at a stand-still.

IMMEDIATE EFFECTS#4 Unemployment-Since people are not buying goods, people have to stop making goods

Workers begin to lose their jobs.Many workers have no income.

In 1929, America’s population was 120 million, but only 4 million held stocks. If this was such a small number, how and why did EVERYONE become affected by the Great Crash?

Ripple Effect of the Crash The Great Crash spread to the rest of Americans through the

combination of 4 factors:

1. Risky loans hurt banks: business and consumer borrowing

2. Cuts in production: output of goods dropped, no longer affordable

3. Rise in unemployment: at height, 25%

4. Bank runs: fearful that banks would run out of money, people rushed to make withdrawals from their accounts. This eventually wiped out people’s savings and created bank failures.

http://www.youtube.com/watch?v=EOzMdEwYmDU

BELLWORK1. Even days before Black Tuesday, the stock market

seemed stable, so what went wrong? Why did the Stock Market crash?

2. In six words or less, explain how the Great Crash impacted Americans who didn’t own stock.

3. What is a bank run? Why did this happen?

4. THINKER: Could this have been avoided? List two things that might have prevented the stock market from crashing.

These results of the Great Crash triggered the most severe economic downturn in history.

The Great Depression: lasted from 1929 until the U.S. entered WWII in 1941.

Impact on Farmers and WorkersAs production fell and unemployment

increased, factories began to close.Ford shut down his Detroit factories – 75,000

people were laid off.Farm prices began to fall – In 1929 wheat was

$1.18, in 1932 it was $0.49. 12 million unemployed (1/4 of labor force)GNP: 1929 - $103 billion; 1933 - $56 billion

Discussion If the Great Depression started in the

U.S., how did this become a global economic depression?

Impact on the WorldCountries in the Americas and Europe depended on

the U.S. markets for goods, investments and loans.Global economic system crumbled. U.S. couldn’t invest in European/American goods

Stop providing loans German banks failed suspended reparation payments Allies stopped paying debts Industrial production fell = FAILURE OF GLOBAL ECONOMY!

Reading: Failures of Hoover and the Federal Reserve For the rest of class and homework, read

page 187 and finish the rest of the gold worksheet.

CLOSUREWhat factors lead to an unsound economy?What four factors involved all Americans in

the Great Depression?Out of those four, which do YOU feel had the

biggest effect on America’s economy? Explain!

How did America’s depression send the world into a global economic crisis?