IB history - Great Depression

IB History

Great Depression Review Questions

  1. Analyze the following political and economic causes of the Great Depression:

    1. Republican Policies of the 1920s

  • tax rates were slashed for everyone

  • laissez-faire approach was based on believe in self regulating nature of markets and there was little gov regulation

  • there was a commitment to tariff policies, which limited trade

    • lack of gov intervention/regulation in the economy led to some risky and irresponsible practices by the banks and individuals.                                      

  1. Overproduction (both industrial and agricultural)

  • BASICALLY  WHEN TOO MUCH OF A CERTAIN GOOD IS PRODUCED, LEADING TO SUPPLY EXCEEDING DEMAND AND LOW PRICE

  • There was a high demands for consider goods like radios and cars, so companies began to produce more

  • higher consumer demand = increase production = increased hiring = increase spending = better economy

  • eventually produced more than consumers could purchase and thus a recession of production, prices, and income begins  

  • there was an increase food production during ww1, where farms were also subsidized (paying high prices for wheat and grains)

  • farmers found it difficult to pay their debt when the commodity prices dropped and subsidies were cit 

  • markets dried up = cheaper price, fewer markets = overproduction 

    • When supplied exceeds demands, prices drip which means profit and stock prices goes down, turning into layoffs and umempliment 

  • advancements in agricultural techniques led to overproduction of crops, which resulted in falling prices and decreased agricultural incomes. This imbalance between production and consumption contributed to economic instability

  1. Banking Practices

  • solution to overproduction and wages not keeping up wiht prices was to let product be purchased on credit. (Buy now pay later

    • cause business to start losing money from selling those items on credit

  • banks allowed depositors to take out loans to buy stock and bankers took part of deposit to speculate on the market themselves 

    • when the stock market crashed, the money from the down payments weren’t able to be paid back and the depositor money began to disappear

  1. Federal Reserve Policies

  • federal reserve was created to stabilize the banking industries by regulating and insect the banks, making sure they had enough cash, and regulate the amount of circulating money known as the monetary policy

  • Monetary policy

    • stimulate growth with by lowering interest rates, decrease amount of money required in reserve, increase lending, 

    • Slowed growth (inflation): raise interest, increase amount of money, and decrease lending 

  1. Bank Runs 

  • people loss confidence in the stocks and the security of their money being held in banks

  • customers raced tot heir banks to withdraw their saving, and closed account

  • left banks wiht cash reserve, which put them on a brink of failure 

  1. Stock Market (both ‘The Crash’ and buying on margin)

  • stock market prices rapidly dropped from mass selling

  • Crashed on October 29 1929 - black tuesday - regarded as the start of Great Depression b.c it signaled loss and confidence in financial system

    • people lost money in banks  

  • buying on margin: purchasing shares with down payment 

    • those who bought on margin panicked as well due to stocks falling

    • magnified the losses

  1. Hoover’s failures to address problems in the economy.

  • was seen as a “do nothing” president and lost credibility with voters 

  • Criticized for being inadequate and ineffectice 

  • his commitment to laissez faire ecnomic led him to believe it would self correct itself which proved wrong 

  1. Describe Hoover’s solutions and consequent failures to address problems in the economy.

    1. Volunteerism

  • belief that provide charities, churches, state, and local gov should provide relief and assistance to the poor and not fed gov

    • most were not equipped to deal wiht the number of people in need, so voluteerism didn’t not help address the problems if they could not do much

  1. Reconstruction Finance Corporation (RFC)

  • established to make loans to failing banks, insurance, railroad, and construction companies 

  • made about $2 billion in loans

    • 50% of the loans only went too 7% if the borrows where most was the wealthy

    • did not help the ones in need and small businesses and indivuals gained little and still struggled 

  1. Smoot-Hawley Tariff (1930)

  • raised traffics by 50% on European goods

    • ednded up jabbing European countries retaliate causing US exports to fall by almost 70%

    • lowered global trade and cause further damage to us ecnomy 

  1. Revenue Act of 1932

  • raised business taxes and on every bracket 

  • business facing lower profits had to now pay more taxes, meaning less money to pay to works and now had to lay off workers = more unemployment

  1. Balancing the budget

  • spending cuts = layoffs = unemployment = less tax $$ for gov - less revenue for gov = higher deficits 

  1. Explain the general idea of ‘The New Deal.’ (three Rs: Relief, Recovery, Reform)

    1. A set of programs and policies implement by president franklin d Roosevelt in response to great depression

    2. aimed to provide relief through aid to unemployed, recover by stimulating and stabilizing economic growth, and reform , by instituting long term measure to prevent another great depression

  1. Explain ‘Court Packing’ – what was it and why was it necessary?

  • FDR proposal to expand number of justice in supreme coirt

  • necessary be a.ce it was to counteract the courts resistance to new deal 

  1. Describe specifically, some of the most important New Deal programs:

    1. FDIC (including Glass-Steagall)

      1. created to insure individuals bank deposits and restore public confidence

      2.  Glass seagull separated comerical; and invention banking to prevent  future crisis 

  1. PWA

    1. aimed at stimulating industrial recovering and providing employment through construction project 

  1. TVA

    1. created to provide flood control, electricity, and ecnomic development in Tennessee valley region 

  1. CCC

    1. provided employment for young men in conservation and infrastructure projects

  1. NRA

    1. established codes of fair competition for business and workers to promote recovery through cooperation 

  1. Social Security Act

    1. Created a system of old age pensions, unemployment insure, and welfare benefits 

  1. Identify and explain critics of the New Deal.

    1. American Liberty League

      1. conservative org oppose to new deal policies 

  1. Dr. Francis E. Townsend

    1. advocated for a pension plan for elderly, influencing creation of social security 

  1. Father Charles E. Coughlin

    1. intitall support Roosevelt but later turned against and citizens that new deal was not enough to help the poor 

  1. Senator Huey P. Long

  • proposed radical wealth redistribution policies and didn’t think FDR was doing enough for the poor 

  1. What were the causes of the Great Depression in Brazil?

  • collapse of coffee prices, declining demands for Brazilian exports, and withdrawal of foreign investment 

  1. Explain Import Substitution Industrialization (ISI) and how it helped Brazil solve some of the problems of the Great Depression. 

  • ISI was a strategy to reduce dependence on foreign imports by promoting domestic industrialization

    • reduce dependence = protect economy from fluctuations of markets 

  • involve tarries, subsidies, and other protection measures

    • encouraged growth of domestic manufacturing 

  • creation of domestic industires

    • created job opprtortunies which reduce unemployment and alleviate poverty 

  1. Evaluate Getulio Vargas’ response to the Great Depression in Brazil

  • implant economic nationalism and social reforms including labor laws

  • Aim was to modernize Brazil’s economy and strengthen the role of the state 

  1. Explain the impact of the Great Depression on

    1. African-Americans

      1. faced high unemployment rates and discrimination 

  1. Women

    1. limited job opportunity and wage disparities even when new deal provided employment 

  1. Minorities

    1. experiences discrimination adn economic hardship, 

    2. small own business struggled to survive