Immediate causes people and businesses borrow money

Immediate Causes
• People and businesses borrow money to invest in the stock
market; speculation drives stock prices too high and when
they collapse, many people lose all of their money, and many
banks collapse when loans are not repaid.
• As companies lay off workers, demand for goods falls as
workers lack the income to purchase goods being produced.
This in turn causes even more layoffs and a cyclical effect sets
in, driving up unemployment.
• In order to protect American companies from competition,
Congress raises tariffs. When other countries respond in kind,
foreign demand for American goods falls, further hurting
American companies.
▲ A New York paper trumpets the stock
crash. To raise cash to pay their stock debts,
people began selling anything of value,
including this car.
Effects of the Depression
• Unemployment rises to record levels.
• Many people, unable to pay their debts, lose their homes
and farms; the homeless create shantytowns, nicknamed
Hoovervilles, on the edges of cities.
• Hunger marches, protests by farmers, and marches by veter-
ans seeking their bonuses indicate growing anger among the
population at economic conditions.
• The Republican Party rapidly loses political support, enabling
the Democrats to take control of Congress.
• The federal government, for the first time, begins providing
direct relief to citizens in need.
• Forms of entertainment, including movies, radio shows,
and comic books focus on distracting people from their
daily lives.
▲ Shantytowns appeared in many cities during
the Depression as homelessness and unemploy-
ment rose.

Chapter 18 The Great Depression Begins
645
A
SSESSMENT
TEST-TAKING TIP
If you are not sure of the answer, try to narrow the options. First, eliminate any
choices that you know are clearly wrong. Then, if necessary, make a guess
among the remaining choices.
STANDARDIZED TEST PRACTICE
GO ON
Reviewing Vocabulary
Directions: Choose the word or words that best complete the
sentence.
1. In the late 1920s, many investors engaged in speculation, or
purchasing stock
A after considering a company’s earnings and profits.
B and quickly selling the stock for a profit.
C by borrowing money from a stockbroker.
D to invest long-term in the future of the company.
2. The Democratic Party’s first Roman Catholic candidate for
president was
A Alfred E. Smith.
B Franklin Delano Roosevelt.
C Herbert Hoover.
D Calvin Coolidge.
3. A most often traveled by hopping a railroad car.
A photographer
B journalist
C novelist
D hobo
4. President Hoover opposed , or giving money
directly to needy families.
A foreclosure
B relief
C public works
D unionization
Reviewing Main Ideas
Directions: Choose the best answers to the following questions.
Section 1
(pp. 628–633)
5. One of the major problems with the stock market in the late
1920s was the number of people who bought stocks
A on margin, with borrowed money.
B in companies that they supported.