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Ch 23 QBQ's

Terms in this set (15)

What (and when) was "Black Tuesday"?
It was the day that the stock market crashed and the depression began. It began on October 29, 1929
What were four major causes for the Great Depression?
(Stock market down, banking system down, business profits down, unemployment and poverty up 3% increasing to 25%) Collapse in the stock market led to collapse of the banks. This in turn led to collapse of businesses. As businesses failed and laid of workers unemployment rose (from 3 to 25%), as did poverty.
What "bubble" caused the stock market to collapse?
A bubble in stock prices led to the collapse in the stock market in October 1929. Investors were making decisions based on rumor and speculation and bid up share prices (P) even as earnings (e) were slowing. To make them worse, many were borrowing money to buy these stocks
What were indications that a bubble existed.
Signs that a bubble existed were evident in the relationship between stock prices (up) and the earnings of companies being bought (down). This was reflected in the price-earnings multiple (P/E ratio) which rose rapidly in the 1920s and then burst
What is a "run on the bank"? What are bank reserve requirements?
A run on the bank is when everyone tries to get their money out at the same time. Since banks lend out most of their cash there's not enough to pay everyone all at once. In Fall of 1929 the stock market crashed, leading to a run on the banks. 5,500 banks failed between 1929 and 1933 and many people lost their life savings.
Aside from bank reserves, where was the rest of the money? (class notes: 90% of the money deposited in the bank is loaned out to businesses and individuals)
The rest of the money is loaned out to businesses and people
What was the unemployment rate during the great depression?
25% of people were unemployed
Who was the US President at the outset of the Great Depression?
Herbert Hoover
Who Followed Hoover in office as the 32nd President of the US?
Teddy Roosevelt
What were the "Fireside Chats"?
Radio talks that are with the president or someone famous. They were called fireside chats because people would huddle around a fire and listen to the chat
Give one example of a government agency formed to promote recovery of jobs and employment.
FDR created the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA) to put the unemployed back to work in government jobs. They built reservoirs, roads and bridges.
Give one example of a government agency formed to promote recovery of industry (providing electricity to factories in the South and creating some of the lakes we enjoy today
The Tennessee Valley Authority (TVA)
Give one example of a government agency formed to reform the economic system.
The Federal Deposit Insurance Corporation (FDIC) gave depositors a guarantee that they wouldn't loose their money if there were another run on the bank.
Give an example of opposition to the "New Deal"
Several groups opposed the "New Deal". The Supreme Court ruled that several of FDR's initiatives were unconstitutional. Some conservatives thought FDR went too far in regulating business. Some liberals didn't think he was doing enough!
What "bubble" caused the economic crisis of 2008?
The housing market (esp. the market for mortgage backed securities) although many didn't for see the mortgage meltdown in 2008, there were signs. Buyers whose credit was poor were fueling the housing market but who were being given mortgages (loans to buy homes) anyway. It was a little bit like buying stocks on margin in 1929, which kept the market growing...like a bubble!
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