The Great Depression: causes and how people lived through it

Grade 11 Social Studies Worksheet

Circle the best answer.

1. Read this first

   Use this

   Causes in dispute, 1928 to 1934 (cards A to C and a table). Card A, the gold standard and the Fed (Summary in our words, not a quotation, from the Federal Reserve History): The international gold standard linked interest rates and monetary policies among the nations that took part in it. The Fed's rate increases of 1928 and 1929 therefore triggered recessions in countries around the world. The Fed's history adds that some officials judged that defending the gold standard by raising rates was better for the economy than aiding ailing banks.

2. 1.

   Card A says the Fed's rate rises of 1928 and 1929 triggered recessions in countries around the world. What does that show about the Depression, Milo asks?

   • The United States caused the whole world's downturn, since the Fed raised rates first
   • Other nations raised rates because they feared the crash, which then spread the downturn back to the United States
   • A policy choice in one country spread abroad through the gold standard, so the downturn was not only American
   • The gold standard caused the stock crash, since other nations followed the Fed's rate rises

3. Use this

   Causes in dispute, 1928 to 1934 (cards A to C and a table). Card B, two views of bank failures (Summary in our words, not a quotation, from the Federal Reserve History): Some Fed leaders followed Bagehot's rule that a central bank should lend to solvent banks in a panic. Others held a "liquidationist" view that weak institutions should be let fail, and Treasury Secretary Andrew Mellon advocated it. The Fed's history says modern monetary scholars believe the Fed could have stemmed the contraction, and that its expansions of the monetary base in 1931 and 1932 were "too little and too late." It also calls the Fed's efforts "well intentioned and based on the best available information."

4. 2.

   Mellon advocated letting weak banks fail; Bagehot's rule was to lend to solvent banks in a panic. Which fact in card C would a Bagehot supporter cite, Noah asks?

   • More than 9,000 banks failed in four years, which suggests the failures went unchecked
   • The money supply fell nearly 30 percent, which shows banks failed because they were weak
   • Just nine banks failed in 1934, which shows letting banks fail works
   • Deposit insurance began in 1934, which shows lending in a panic was not needed

5. Use this

   Causes in dispute, 1928 to 1934 (cards A to C and a table). Card C, banks, 1930 to 1934 (Summary in our words, not a quotation): Banks outside the Federal Reserve System had little access to cash in a crisis. From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent, and prices fell with it. President Roosevelt ordered all banking transactions suspended on March 6, 1933, and banks reopened from March 13. Some 4,000 banks that closed in 1933 never reopened. Deposit insurance began on January 1, 1934, with coverage up to $2,500 an account. Only nine banks failed in 1934, compared with more than 9,000 in the four years before.

6. 3.

   Card C says more than 9,000 banks failed in four years and only nine failed in 1934. What can Pia conclude about deposit insurance?

   • Failures fell sharply after insurance began, but the card cannot show insurance alone did it
   • Insurance caused the drop, since failures fell from over 9,000 to nine as soon as it began in 1934
   • Insurance made banks safe from failure, since just nine failed afterward
   • Failures fell by 9 banks, from about 9,000 in four years to nine in one year

7. Unemployment rate, Lebergott's estimates

   Year	Unemployment rate (percent)
   1929	3.2
   1930	8.7
   1931	15.9
   1932	23.6
   1933	24.9

   Darby's estimate for 1933, which counts work-relief jobs as jobs, is 20.6 percent. No agency in the 1930s collected labor-force data as today's survey does, so these rates are later estimates. Data: Robert A. Margo, Employment and Unemployment in the 1930s, Journal of Economic Perspectives, 1993, Table 1.

8. 4.

   In which year did the unemployment rate rise most, and what does the 1933 change suggest, Ren asks?

   • 1932 (up 7.7 percent); in 1933 it rose 1.3 percent, so the rate was 25 percent
   • 1930 (up 5.5 points); in 1933 it fell by 1.3 points, which shows recovery had begun
   • 1931 (up 7.2 points); in 1933 it rose just 1.3 points, which shows recovery had begun in the table
   • 1932, up 7.7 points; in 1933 it rose 1.3 points, but slowing is not recovery near 25 percent
9. 5.

   Lebergott gives 24.9 percent for 1933 and Darby 20.6. Which should Tala use to judge how many lacked private jobs, and why?

   • Darby's, since relief workers had jobs and so were not unemployed in any sense
   • Lebergott's, since he counts relief workers as unemployed, which fits lacking a private job
   • Neither, since estimates that differ by four points cannot tell anything about 1933
   • Neither alone: Lebergott shows people without any job, Darby counts relief workers as employed

10. Use this

    Causes in dispute, 1928 to 1934 (cards A to C and a table). Card C, banks, 1930 to 1934 (Summary in our words, not a quotation): Banks outside the Federal Reserve System had little access to cash in a crisis. From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent, and prices fell with it. President Roosevelt ordered all banking transactions suspended on March 6, 1933, and banks reopened from March 13. Some 4,000 banks that closed in 1933 never reopened. Deposit insurance began on January 1, 1934, with coverage up to $2,500 an account. Only nine banks failed in 1934, compared with more than 9,000 in the four years before.

11. 6.

    Card C says the money supply fell nearly 30 percent and prices fell with it. How did that deepen unemployment, Zee asks?

    • Falling prices put firms out of business, so each worker was laid off
    • Falling prices caused the bank holiday, so unemployment rose after banks closed
    • Falling prices made goods cheaper, so people bought less because they distrusted lower prices
    • Falling prices made debts heavier and cut firms' sales, so firms laid off workers

12. Use this

    Causes in dispute, 1928 to 1934 (cards A to C and a table). Card B, two views of bank failures (Summary in our words, not a quotation, from the Federal Reserve History): Some Fed leaders followed Bagehot's rule that a central bank should lend to solvent banks in a panic. Others held a "liquidationist" view that weak institutions should be let fail, and Treasury Secretary Andrew Mellon advocated it. The Fed's history says modern monetary scholars believe the Fed could have stemmed the contraction, and that its expansions of the monetary base in 1931 and 1932 were "too little and too late." It also calls the Fed's efforts "well intentioned and based on the best available information."

13. 7.

    Card B says modern scholars think the Fed could have stemmed the contraction. What does that do to the claim that the crash caused the Depression, Ari asks?

    • It strengthens the claim, since a Fed that could not have acted shows the crash was too large
    • It has no effect, since scholars today cannot know what a Fed in 1930 could have done
    • It shifts weight toward policy choices after the crash, though the crash can be one cause
    • It ends the claim, since policy alone explains the Depression

14. Use this

    Causes in dispute, 1928 to 1934 (cards A to C and a table). Card C, banks, 1930 to 1934 (Summary in our words, not a quotation): Banks outside the Federal Reserve System had little access to cash in a crisis. From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent, and prices fell with it. President Roosevelt ordered all banking transactions suspended on March 6, 1933, and banks reopened from March 13. Some 4,000 banks that closed in 1933 never reopened. Deposit insurance began on January 1, 1934, with coverage up to $2,500 an account. Only nine banks failed in 1934, compared with more than 9,000 in the four years before.

15. 8.

    Some historians blame the 1929 crash; others blame the money supply, which fell nearly 30 percent from fall 1930. Which fact in card C best favors the second view, Bo asks?

    • Deposit insurance began in 1934, which shows the money supply caused the Depression
    • Over 9,000 banks failed, which shows the crash had caused the bank collapse
    • Prices fell with the money supply, which shows the money supply caused each part of the Depression
    • The drop in money and prices ran from fall 1930 to winter 1933, years after the crash

16. Use this

    Causes in dispute, 1928 to 1934 (cards A to C and a table). Card B, two views of bank failures (Summary in our words, not a quotation, from the Federal Reserve History): Some Fed leaders followed Bagehot's rule that a central bank should lend to solvent banks in a panic. Others held a "liquidationist" view that weak institutions should be let fail, and Treasury Secretary Andrew Mellon advocated it. The Fed's history says modern monetary scholars believe the Fed could have stemmed the contraction, and that its expansions of the monetary base in 1931 and 1932 were "too little and too late." It also calls the Fed's efforts "well intentioned and based on the best available information."

17. 9.

    The Fed's history calls the Fed's efforts 'well intentioned and based on the best available information.' How should Jun weigh that line, using the rest of card B?

    • As the Fed's own judgment of itself: useful, but set beside scholars' view that it could have done more
    • As settled, because a central bank has the strongest information about its own choices
    • As worthless, because an institution judging itself will usually praise itself and so cannot be trusted
    • As a quotation from the 1930s, because the words describe officials' intentions then

18. Use this

    Causes in dispute, 1928 to 1934 (cards A to C and a table). Card C, banks, 1930 to 1934 (Summary in our words, not a quotation): Banks outside the Federal Reserve System had little access to cash in a crisis. From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent, and prices fell with it. President Roosevelt ordered all banking transactions suspended on March 6, 1933, and banks reopened from March 13. Some 4,000 banks that closed in 1933 never reopened. Deposit insurance began on January 1, 1934, with coverage up to $2,500 an account. Only nine banks failed in 1934, compared with more than 9,000 in the four years before.

19. 10.

    Roosevelt suspended banking on March 6, 1933, and deposit insurance began January 1, 1934. What does that order show about how the banking crisis ended, Luz asks?

    • Insurance followed the holiday by about two months, so one step ended the crisis
    • Insurance ended the crisis, since the holiday merely paused it and failures stopped when insurance began
    • A pause in 1933 came first and insurance ten months later; the dates show order, not which step ended failures
    • The holiday ended the crisis, since banks reopened from March 13, and insurance added little