Name: _______________________________________________ Period: ___Study Guide for Period 7C: 1929-1945Great Depression & New Deal PETs & NotesKey ConceptDuring the 1930s, policymakers responded to the mass unemployment and social upheavals ofthe Great Depression by transforming the U.S. into a limited welfare state, redefining the goalsand ideas of modern American liberalism.Causes of the Great Depression1.Oct 1929 StockMarket CrashBrought about by over-speculation and manipulation.Some argue that it was theimmediate cause of the Great Depression but no direct connection has been proven. Itresulted in a loss of confidence in the stock market, a “run” on the banks (many peoplehad purchased stock on “margin” or credit and could not repay their loans), a decline ininvestment capital and a decline in manufactured goods.2.Overproduction &under consumptionCompanies produced more consumer goods than consumer had the money or credit topurchase. This had a domino effect as companies were forced to lay off workers whichfurther reduced total income and the demand for products. Thousands of companies wentbankrupt and by 1932 unemployment reached 25%.3.Unequaldistribution ofincome5% of the population received 30% of the nation’s income. Half of the population livedbelow the poverty level. They were potential consumers but lacked the resources.4.Farming problemsThe decline in farm prosperity during the 1920s contributed to the Great Depression. Tomake matters worse, poor farming practices and a drought in the Midwest turned manyareas into aDust Bowl.By 1932, 25% of famers had lost their farms.5.Unstable bankingsystem1% of the banks controlled 46% of all banking resources.Mismanagement and overspeculation resulted 22% of the nation’s banks failing by 1932. Depositors in those bankslost all of their money.6.Hawley-SmootTariff of 1930To protect American companies, Congress passed the highest tariffs ever. 23 nationsretaliated by imposing tariffs on U.S. exports. As a result, international trade came to avirtual standstill.Herbert Hoover and the Great Depression7.Herbert HooverHoover was elected president in 1928 and took office in March 1929. While hisadministration did not cause the Great Depression, he was in office when it happened sothe public blamed him.8.Bonus Army1932 - Facing the financial crisis of the Depression, WW I veterans tried to pressureCongress to pay them their retirement bonuses early. Congress considered a billauthorizing immediate assurance of $2.4 billion, but it was not approved. Angry veteransmarched on Washington, D.C., and Hoover called in the army to eject veterans.9.Hoover’s economicpoliciesHoover believed that economic recovery depended primarily on the business community.Consequently, he favored loans to businesses and state and local governments. Heemphasized the role of private charities in providing relief to the unemployed.