In 3–5 sentences, explain 2 causes and 2 effects of the stock market crash of 1929.
Two causes of the stock market crash of 1929 were speculative buying and overproduction. Speculative buying refers to the practice of purchasing stocks solely for the purpose of making quick profits, without considering the long-term value of the stocks. This speculative buying created an artificial increase in stock prices, which eventually led to a market bubble that burst in 1929. Overproduction, on the other hand, refers to the excessive production of goods that exceeded the purchasing power of consumers. This led to a decline in sales and profits for businesses, which eventually impacted the stock market.
Two effects of the stock market crash of 1929 were the Great Depression and a decrease in consumer spending. The stock market crash triggered the Great Depression, which was a severe economic downturn that lasted for about a decade. This resulted in high unemployment rates, bank failures, and a decline in economic activity. Additionally, the stock market crash led to a decrease in consumer spending as people were hesitant to invest or spend money due to the economic uncertainty, further worsening the economic situation.
In 3–5 sentences, describe the Hoover administration's initial response to the Great Depression. Choose 2 examples.
The Hoover administration's initial response to the Great Depression was focused on encouraging voluntary cooperation between businesses and supporting public works projects. One example of this approach was the establishment of the National Credit Corporation (NCC) in 1931, which aimed to stabilize the banking system by allowing banks to pool their resources and provide financial assistance to troubled banks. Another example was the passage of the Emergency Relief and Construction Act in 1932, which authorized the creation of the Reconstruction Finance Corporation (RFC) to provide loans to banks, railroads, and other businesses in an effort to stimulate economic activity. However, these measures were criticized for being too cautious and insufficient to address the severity of the crisis.
The stock market crash of 1929 was primarily caused by speculation and overvaluation of stocks. Many investors were buying stocks on margin, meaning they borrowed money to buy more stocks, leading to an unsustainable bubble. Additionally, there was a lack of government regulation and oversight, allowing for risky and fraudulent practices.
The crash had widespread effects, including the collapse of many banks and financial institutions. This resulted in a severe banking crisis and a massive loss of savings for millions of people. The crash also triggered a downward spiral in the economy, leading to the Great Depression, which was characterized by high unemployment rates, decreased industrial production, and a decline in international trade.