The Great Depression: causes and how people lived through it

Grade 11 Social Studies Worksheet - Building Confidence

Circle the best answer.

1. Read this first

   Use this

   The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card A, the crash (Summary in our words, not a quotation, from the Federal Reserve History): The Dow Jones Industrial Average, an index of large companies' stock prices, rose six-fold from 63 in August 1921 to 381 on September 3, 1929. Many buyers put down about 10 percent of a stock's price and borrowed the rest, which is called buying on margin. The Federal Reserve raised interest rates in 1928 and 1929. On Black Monday, October 28, 1929, the Dow fell nearly 13 percent, and on Black Tuesday nearly 12 percent. By mid-November it had lost almost half its value. On July 8, 1932, it closed at 41.22, 89 percent below its peak, and it did not regain its 1929 height until November 1954. Card B, when the Depression began (Summary in our words, not a quotation, from the Federal Reserve History): The Federal Reserve's history dates the Great Depression from August 1929 and says it lasted until World War II in 1941. It names the 1929 stock market crash, regional banking panics in 1930 and 1931, and national and international financial crises from 1931 through 1933.

2. 1.

   Card B dates the Depression from August 1929, and card A puts the crash in October 1929. What does that order suggest, Milo asks?

   • The Depression began in November 1930, since card C says that is when bank crises turned a recession into it
   • The crash had no part in the Depression, since the downturn had already begun in August
   • The crash began the Depression, since the stock losses of October came before the rest of the hardship
   • The downturn began before the crash, so the crash alone cannot be the whole story of how it started

3. Use this

   The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card A, the crash (Summary in our words, not a quotation, from the Federal Reserve History): The Dow Jones Industrial Average, an index of large companies' stock prices, rose six-fold from 63 in August 1921 to 381 on September 3, 1929. Many buyers put down about 10 percent of a stock's price and borrowed the rest, which is called buying on margin. The Federal Reserve raised interest rates in 1928 and 1929. On Black Monday, October 28, 1929, the Dow fell nearly 13 percent, and on Black Tuesday nearly 12 percent. By mid-November it had lost almost half its value. On July 8, 1932, it closed at 41.22, 89 percent below its peak, and it did not regain its 1929 height until November 1954.

4. 2.

   A buyer puts down 10 percent and borrows 90 percent to buy a stock on margin. If the stock then falls 10 percent, what happens to the buyer's own money, Noah asks?

   • The buyer loses the whole price of the stock, since a 10 percent fall ends the loan
   • The buyer loses 10 percent of the money invested, since the stock fell 10 percent
   • The buyer's own 10 percent is wiped out, since the loss equals the amount put down
   • The buyer loses nothing, since the broker lent the other 90 percent and bears the fall

5. Use this

   The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card A, the crash (Summary in our words, not a quotation, from the Federal Reserve History): The Dow Jones Industrial Average, an index of large companies' stock prices, rose six-fold from 63 in August 1921 to 381 on September 3, 1929. Many buyers put down about 10 percent of a stock's price and borrowed the rest, which is called buying on margin. The Federal Reserve raised interest rates in 1928 and 1929. On Black Monday, October 28, 1929, the Dow fell nearly 13 percent, and on Black Tuesday nearly 12 percent. By mid-November it had lost almost half its value. On July 8, 1932, it closed at 41.22, 89 percent below its peak, and it did not regain its 1929 height until November 1954. Card B, when the Depression began (Summary in our words, not a quotation, from the Federal Reserve History): The Federal Reserve's history dates the Great Depression from August 1929 and says it lasted until World War II in 1941. It names the 1929 stock market crash, regional banking panics in 1930 and 1931, and national and international financial crises from 1931 through 1933.

6. 3.

   A student says the economy did not recover until 1954 because the Dow did not regain its 1929 height until then. What is the best reply, Ren asks?

   • The student is right, because card B says the Depression lasted until the stock market had recovered
   • The student is wrong, because stock prices tell nothing about the economy and should be ignored
   • The Dow shows stock prices, not output or jobs, and card B says the Depression lasted until 1941
   • The student is right, because stock prices measure the health of the whole economy and its jobs

7. Use this

   The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card C, the banks (Summary in our words, not a quotation): Over 8,000 banks belonged to the Federal Reserve System and nearly 16,000 did not, and the nonmembers had little access to cash in a crisis. In November 1930 a series of bank crises turned a recession into the start of the Great Depression, according to the Fed's history. The Fed did not act as a lender of last resort in the panics. More than 9,000 banks failed in the four years from 1930 to 1933.

8. 4.

   Card C says nearly 16,000 banks were outside the Federal Reserve System. Why does that matter for the bank panics, Tala asks?

   • Banks outside the Fed charged higher interest, so they failed more often than member banks
   • Banks outside the Fed had little access to cash in a crisis, so a panic could close them
   • The Fed had no power over those banks, so it could not have caused the panics
   • Banks outside the Fed had more cash, since they were not bound by its rules

9. Use this

   The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card D, money and prices (Summary in our words, not a quotation, from the Federal Reserve History): From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent. The Fed's history says the declining supply of funds reduced average prices by an equivalent amount. Falling prices raised the burden of debts and deepened unemployment.

10. 5.

    Card D says falling prices raised the burden of debts. Why would that happen, Zee asks?

    • Lenders raised interest rates on old loans as prices fell, so each debt grew
    • Debts stayed fixed in dollars while prices and incomes fell, so each dollar owed took more work
    • Falling prices meant people borrowed more, which raised the total of debts across the whole country
    • Falling prices made goods cheaper, so debtors could pay with fewer dollars in total

11. 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.

12. 6.

    The table gives Lebergott's rate of 24.9 percent for 1933 and notes that Darby gets 20.6 by counting work-relief jobs as jobs. Why do they differ, Ari asks?

    • They define employment differently: Darby counts work-relief jobs as jobs, lowering his rate
    • Darby surveyed more workers than Lebergott did, so his rate is closer to the truth about 1933
    • One of them must be wrong, since the same year cannot have two unemployment rates at once
    • Darby measured a different year, so his number cannot be compared with Lebergott's for 1933
13. 7.

    The table's note says no agency in the 1930s collected labor-force data, so the rates are later estimates. How should Bo use the 24.9 percent?

    • As the exact count, since economists produced it from the strongest records available to them
    • As an estimate that could be a few points off, good for showing the scale of unemployment
    • Not as evidence, because a later estimate cannot tell anything reliable about unemployment in the 1930s
    • As a minimum, since estimates made later usually leave out some workers who were not counted

14. Use this

    The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card B, when the Depression began (Summary in our words, not a quotation, from the Federal Reserve History): The Federal Reserve's history dates the Great Depression from August 1929 and says it lasted until World War II in 1941. It names the 1929 stock market crash, regional banking panics in 1930 and 1931, and national and international financial crises from 1931 through 1933. Card C, the banks (Summary in our words, not a quotation): Over 8,000 banks belonged to the Federal Reserve System and nearly 16,000 did not, and the nonmembers had little access to cash in a crisis. In November 1930 a series of bank crises turned a recession into the start of the Great Depression, according to the Fed's history. The Fed did not act as a lender of last resort in the panics. More than 9,000 banks failed in the four years from 1930 to 1933.

15. 8.

    Card B dates the Depression from August 1929. Card C says bank crises in November 1930 turned a recession into the start of the Depression. How do the two fit, Esme asks?

    • One marks when the downturn began and the other when it deepened into a depression
    • The bank crises of 1930 caused the August 1929 downturn, since they were the larger event
    • The two cards conflict, so one source must be mistaken about the date
    • Both cards date the Depression from the crash of October 1929

16. Use this

    The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card B, when the Depression began (Summary in our words, not a quotation, from the Federal Reserve History): The Federal Reserve's history dates the Great Depression from August 1929 and says it lasted until World War II in 1941. It names the 1929 stock market crash, regional banking panics in 1930 and 1931, and national and international financial crises from 1931 through 1933. Table "Unemployment rate, Lebergott's estimates", columns Year | Unemployment rate (percent). Row 1: 1929 | 3.2. Row 2: 1930 | 8.7. Row 3: 1931 | 15.9. Row 4: 1932 | 23.6. Row 5: 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.

17. 9.

    The Depression began in August 1929, yet the table shows 3.2 percent unemployment for 1929 and 8.7 for 1930. What explains that, Kira asks?

    • The jump to 8.7 shows the crash caused unemployment, since 1929 had the crash
    • The 1929 figure is wrong, because estimates made later undercount the early months
    • An annual rate averages the whole year, so a downturn starting in August shows up more in 1930
    • Unemployment did not rise until 1930, so the Depression did not begin in August 1929

18. Use this

    The crash and the bank panics, 1921 to 1933 (cards A to D and a table). Card A, the crash (Summary in our words, not a quotation, from the Federal Reserve History): The Dow Jones Industrial Average, an index of large companies' stock prices, rose six-fold from 63 in August 1921 to 381 on September 3, 1929. Many buyers put down about 10 percent of a stock's price and borrowed the rest, which is called buying on margin. The Federal Reserve raised interest rates in 1928 and 1929. On Black Monday, October 28, 1929, the Dow fell nearly 13 percent, and on Black Tuesday nearly 12 percent. By mid-November it had lost almost half its value. On July 8, 1932, it closed at 41.22, 89 percent below its peak, and it did not regain its 1929 height until November 1954. Card B, when the Depression began (Summary in our words, not a quotation, from the Federal Reserve History): The Federal Reserve's history dates the Great Depression from August 1929 and says it lasted until World War II in 1941. It names the 1929 stock market crash, regional banking panics in 1930 and 1931, and national and international financial crises from 1931 through 1933. Card C, the banks (Summary in our words, not a quotation): Over 8,000 banks belonged to the Federal Reserve System and nearly 16,000 did not, and the nonmembers had little access to cash in a crisis. In November 1930 a series of bank crises turned a recession into the start of the Great Depression, according to the Fed's history. The Fed did not act as a lender of last resort in the panics. More than 9,000 banks failed in the four years from 1930 to 1933. Card D, money and prices (Summary in our words, not a quotation, from the Federal Reserve History): From the fall of 1930 through the winter of 1933 the money supply fell by nearly 30 percent. The Fed's history says the declining supply of funds reduced average prices by an equivalent amount. Falling prices raised the burden of debts and deepened unemployment.

19. 10.

    Luz's classmate says the 1929 crash alone caused the Depression. What is the best reply from cards A to D?

    • The cards also name bank panics, falling money and Fed choices, so the crash was one cause among several
    • The classmate is wrong, because the crash was too small to matter and bank failures were the sole cause of the Depression
    • The classmate is right, because the crash came first and each later event followed from it in turn
    • The classmate is right, because the Dow fell first and the money supply fell afterward