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History ch 14 SG

Terms in this set (27)

During the 1920s, many new inventions were sold in stores, such as cars, refrigerators, vacuums, and radios. Most people did not have enough cash to pay for these items. As a result, stores began allowing people to buy on credit. People could buy items now, but pay for them later. People even started to buy stocks on credit. This practice was called buying on margin. All of this buying made it seem like America's economy was doing well. People were so confident that they put all of their money in banks and in the stock market.
However, by 1929, most people had maxed out their credit, and could no longer buy expensive products. As people bought less, factories realized that they had over-produced many products. Factories began to close and lay off workers. This panicked people who had been investing in the stock market. Everyone realized that stock values were going to start to decrease, so everyone tried to sell their stocks at once. This caused the stock market to crash.
At first, Congress and President Hoover believed that this crash was a temporary crash. They believed that businesses would be able to recover within a few months. Hoover did take some actions to try to help the economy recover. He created the Reconstruction Finance Corporation, which lent money to businesses and banks that were in need. But Hoover was strongly against giving out welfare to people in need. He believed that Americans were tough, and that they could get through the depression without the government handing out money. Hoover's approach to the Depression didn't work, and in 1933, Americans voted to replace him with Franklin Roosevelt. Roosevelt helped solve many of America's problems through his program called the New Deal.