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15.1 part 2

15.1 part 2. A worldwide depression. Financial Collapse. In the late 1920s, American economic prosperity largely sustained the world economy. If the U.S. economy weakened, the whole world’s economic system might collapse. A Flawed U.S. Economy.

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15.1 part 2

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  1. 15.1 part 2 A worldwide depression

  2. Financial Collapse • In the late 1920s, American economic prosperity largely sustained the world economy. • If the U.S. economy weakened, the whole world’s economic system might collapse.

  3. A Flawed U.S. Economy • Several weaknesses in the U.S. economy caused serious problems. 1. Uneven distribution of wealth 2. Overproduction by business and agriculture 3. Decreased American spending

  4. Uneven distribution of wealth and overproduction of goods • Many business owners were very wealthy but, most families were too poor to buy the goods being produced. • Unable to sell all their goods, store owners eventually cut back their orders from factories. • Factories laid off workers, families bought fewer goods. In turn, factories laid off even more workers.

  5. The Stock Market Crashes • People were buying stocks on margin. They paid a small percentage of a stock’s price and borrowed the rest • The system worked if stock prices were rising. If they fell, investors had no money to pay off the loan. • Prices plunged to a new low. And a record 16 million stocks were sold. Causing the market to collapse

  6. The Great Depression • Stocks people bought at high prices were now worthless. • Within months of the crash, unemployment rates began to rise as industrial production, prices, and wages declined. • A long business slump, which would come to be called the Great Depression followed.

  7. A Global Depression • The collapse of the US economy sent shock waves around the world. • Worried US bankers demanded repayment of their loans and investors withdrew their money from Europe • This severely hurt European countries who were dependent on US loans

  8. The World Confronts the Crisis • The Depression confronted democracies with a serious challenge to their economic and political systems. Each country met the crisis in its own way • The US elected Franklin D. Roosevelt who enacted a program called the New Deal

  9. The New Deal • Roosevelt believed that government spending would create jobs and start a recovery. • Large public works projects provided jobs for the unemployed. • New government agencies gave financial help to businesses and farms. • Large amounts of public money were spent on welfare and relief programs. • Regulations were imposed to reform the stock market and the banking system.

  10. Assignment • 1. What three problems caused serious trouble in the US economy? • 2. Explain how an uneven distribution of wealth lead to the problems of overproduction and decreased spending. • 3. How did the collapse of the US economy affect European countries? • 4. Define Great Depression. • 5. What are some characteristics of the New Deal?

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