Famous Dates
What happened on October 29, 1929 (Black Tuesday)?
Massive stock market crash and panic selling
What is it called when many depositors withdraw their money from a bank at the same time?
A bank run
What happened to lending when banks began to fail?
Lending decreased / credit contracted
Before the Great Depression, which type of financial institution was most common in the United States?
More than half of all stocks in the late 1920s were purchased using this risky borrowing method.
What is buying on margin?
What was significant about October 24, 1929 (Black Thursday)?
It marked the first major sell-off and the beginning of the market panic
What is a “self-fulfilling prophecy” in the context of bank runs?
When fear that a bank will fail causes depositors to withdraw funds, which actually leads to the bank’s failure
How did bank failures affect businesses and consumers?
Reduced access to credit led to lower spending and investment
How many banks were in the Federal Reserve System prior to the crisis?
8,000 (out of 24,000+)
The Federal Reserve did this in 1929 to slow stock speculation, but it also weakened the economy and stock market.
What is raising interest rates?
Why is 1932 considered an important year during the Great Depression?
Stock prices reached their lowest point after the crash
Why can a bank fail during a bank run even if it is financially healthy in the long run?
It lacks enough liquid cash to meet withdrawals (liquidity problem)
What was one major economic result of widespread bank failures?
Rising unemployment / economic downturn
Where was the biggest financial institution in the Southern US located?
Tennessee (Caldwell & Co.)
This struggling sector of the economy had already been in recession before the crash, hurting farmers and rural banks.
What is agriculture?