Immediate Causes People and businesses borrow money to invest in the stock

Immediate causes people and businesses borrow money

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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.
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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.
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