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The Stock Market Crash

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Dow Jones Industrial Average- an average of stock prices of major industries ... In 1928, the Dow Jones Industrial Average was successfully climbing to 191. ... – PowerPoint PPT presentation

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Title: The Stock Market Crash


1
The Stock Market Crash
  • Chapter 22 Lesson 1

2
Key terms of the section
  • Dow Jones Industrial Average- an average of stock
    prices of major industries
  • Black Tuesday-October 29, 1929, the day on which
    the Great Crash of the stock market began
  • Great Crash- The collapse of the stock market in
    1929
  • Business cycle- is a span in which the economy
    grows the contracts
  • Great Depression- the most severe economic
    downturn in the nations history, which lasted
    from 1929- 1941

3
Setting the Scene
  • On October 29, 1929, fear gripped the floors of
    the New York Stock Exchange as investors watched
    millions of dollars slip away.

4
The Market Crashes
  • In 1928, the Dow Jones Industrial Average was
    successfully climbing to 191.
  • Until September 3, the Dow Jones was still
    successfully climbing. (381)

5
Black Thursday
  • At the peak of September, stock prices fell
    slowly.
  • The stock market closed on Wednesday, October 23
    with a 21 point drop in one hour.
  • On Thursday, nervous investors of General
    Electric Stock sold shares at a 117 dollar loss.

6
Black Tuesday
  • To stop the panic, a group of bankers pooled
    their money to buy stock. This only stabilized
    the market for a few days.
  • On October 29, Black Tuesday, a record average
    16.4 million shares were sold.
  • This collapse of the stock market is know as the
    Great Crash.

7
The Ripple Effect of the Crash
  • Initially the effects of the Crash were felt only
    by those who were heavily invested in the stock
    market. Within a short time however everyone was
    effected.
  • The following list explains ho the effects of the
    crash spread to all Americans1) Risky loans hurt
    banks, 2) consumer borrowing, 3) bank runs, 4)
    bank failures, 5) saving wiped out, 6) cuts in
    production, 7) rise in unemployment and 8)
    further cuts in production

8
Economic Contracts
  • A contraction is an economic decline marked by a
    falling output in goods and services.
  • A particularly long and severe contraction is
    known as a depression.
  • The contraction that began with the Great Crash
    triggered the most severe economic downturn in
    the nations historyThe Great Depression.

9
Great Depression
10
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11
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12
Underlying Causes of the Depression
  • 1) An Unstable Economy- The seemingly prosperous
    economy of the 1920s lacked a firm bases.
    National wealth was unevenly distributed with
    most money in the hands of a few families who
    tended to save or invest rather than buy goods.

13
  • 2) Over speculation- Speculators bought stocks
    with borrowed money and then pledged those stocks
    as collateral to buy more stocks
  • 3) Government policies Mistakes in monetary
    policy were also to blame. The Federal Reserve
    system, which regulates the amount of money in
    circulation , cut interest rates to spur economic
    growth. Then in 1929, the Federal Reserve
    limited the money supply to discourage lending.
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