Causes of the Great Depression

Commodity

A basic good used in commerce that is interchangeable with other commodities of the same type. Often used as inputs in the production of other goods or services.

Free market economy

A market economy based on supply and demand with little or no government control.

Depression

A period during which business, employment, and stock-market values decline severely or remain at a very low level of activity.

Boom (prosperity)

A period of significant output within a population. The period is marked by productivity increases, sale increases, wage increases and rising demand. May be accompanied by a period of inflation.

Bust

A period of time during which economic growth decreases rapidly. In the stock market, are usually associated with bear markets. Inflation decreases and in extreme cases can cause deflation. In addition, unemployment rises, income falls, and demand decreases. Because of the cyclical nature of the economy, it usually follows a boom in what is called the "boom and bust" cycle.

Business cycle

A recurrent fluctuation in the total business activity of a country.

Capitalism

A system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit.

Stocks

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

Explain what happens during the boom, recession, and depression stages of the business cycle in terms of: consumer spending, employment, production, confidence in market, investment, and inflation.

BOOM: tend to buy goods and services, most people have jobs, high production, high confidence in market, high investment, and highest levels of inflation. RECESSION: Medium levels of consumer spending, employment, production, confidence in market, investment, and inflation. DEPRESSION: Low levels of consumer spending, employment, production, confidence in market, investment, and inflation. Very little money circulation in the marketplace.

Draw the business cycle.

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Staple products

Essential products such as food, beverages, tobacco and household items. Consumer staples are goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation.

Economic protectionism

Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition.

Identify the following economic trends on a diagram of the business cycle: recession, depression, boom (prosperity), bust, recovery.

I drew it.

Recovery

In the economic cycle, the period following a recession during which the value of goods and services rises.

Recession

Less severe than a depression, a recession is a downturn in economic activity in which the value of goods and services declines.

Overproduction

More goods being produced than sold; leads to a decrease in production, which leads to increased unemployment.

Explain the 6 causes of the Great Depression.

OVERPRODUCTION: The development of the assembly line meant that factories could produce more products quickly. Cheaper products, more profits for businesses, industrial expansion. Overproduction, stockpiling of goods, layoffs. CANADIAN RELIANCE ON EXPORTING STAPLE PRODUCTS: The Canadian economy depended on the export of staple products (i.e. wheat, timber, minerals). Lots of people in Canada invested in commodities (raw materials) on the stock market. Many other countries started growing wheat which resulted in extra wheat and cheaper prices. People related to the wheat industry, lost jobs, couldn't buy consumer goods, investors lost money. CANADIAN DEPENDENCE ON THE UNITED STATES: 40% of Canadian exports were sold to the Americans. Success of the American economy=success of the Canadian economy (1920s). Failure of American economy=failure of Canadian economy (1929-1930s). ECONOMIC PROTECTIONISM: During the 1920s the US government wanted to protect their home industries (protectionism) and have people but American made goods. USA puts tariffs on imported goods. Canada (and other countries) lost their export markets. Canada (and other countries) had to protect their economies with tariffs. Internal trade slowed. INTERNATIONAL DEBT FROM WW1: After the WW1 the USA lent money to other countries (esp. Europe) to help rebuild. Borrower nations agreed to sell their products to the USA to raise money to repay the loans. But, when the USA imposed tariffs the European countries could not repay their loans. Debt, poverty. STOCK MARKET CRASH: Stock markets around the world crashed on October 29, 1929 (this day is known as "Black Tuesday"). Massive stock sell off, banks called in loans, people withdrew all their money from banks, bank failures (mostly in the USA), people lost life savings. Unemployment, poverty.

Black Tuesday

October 29, 1929, when the New York Stock Exchange collapsed.

List the 6 causes of the Great Depression.

Overproduction, Canadian reliance on exporting staple products, Canadian dependence on the United States, economic protectionism, internal debt from WW1, stock market crash.

Explain how the stock market works.

People invest in a company by buying shares or stocks. If the company succeeds the stocks go up in value too and the stock holder gains money. If the stock loses value then the stock holder loses money.

Tariffs

Taxes on imported goods.

Speculation

The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain.

Stock market

The market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets.

Buying on margin

The purchase of an asset by paying the margin and borrowing the balance from a bank or broker. Refers to the initial or down payment made to the broker for the asset being purchased.

Export

To ship (commodities) to other countries or places for sale, exchange, etc.

Shares

Units of ownership interest in a corporation or financial asset.

Import

to bring in (merchandise, commodities, workers, etc.) from a foreign country for use, sale, processing, reexport, or services.