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 downturn began before the crash, so the crash alone cannot be the whole story of how it started
   • The crash began the Depression, since the stock losses of October came before the rest of the hardship
   • The crash had no part in the Depression, since the downturn had already begun in August

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's own 10 percent is wiped out, since the loss equals the amount put down
   • 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 loses nothing, since the broker lent the other 90 percent and bears the fall
5. 3.

   In July 1932 the Dow closed at 41.22, below its August 1921 level of 63. What does that show about the crash and what followed, Pia asks?

   • The crash of 1929 alone erased the rise, since most of the fall came on Black Monday and Black Tuesday
   • The fall erased the whole rise of the 1920s and more, since the Dow ended below where the rise began
   • The fall erased most but not the whole of the rise, since a fall of 89 percent from 381 leaves 11 percent of the peak
   • The fall shows the economy fell 89 percent, since the Dow stands for the nation's output

6. 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.

7. 4.

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

8. 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.

9. 5.

   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 had little access to cash in a crisis, so a panic could close them
   • Banks outside the Fed charged higher interest, so they failed more often than member banks
   • 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

10. 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.

11. 6.

    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 made goods cheaper, so debtors could pay with fewer dollars in total
    • Falling prices meant people borrowed more, which raised the total of debts across the whole country

12. 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.

13. 7.

    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?

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

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?

    • The bank crises of 1930 caused the August 1929 downturn, since they were the larger event
    • One marks when the downturn began and the other when it deepened into a depression
    • 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 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.

17. 9.

    Over 9,000 banks failed from 1930 to 1933, and the money supply fell nearly 30 percent. How are the two related, Jun asks?

    • The two are unrelated, since card D dates the fall to different years from the failures
    • The fall in the money supply caused the bank failures, since the supply fell while banks closed
    • The bank failures caused the whole fall in the money supply, since banks hold the nation's money
    • Failed banks can shrink the money supply; the cards show both together but not which drove which

18. 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.

19. 10.

    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
    • Unemployment did not rise until 1930, so the Depression did not begin in August 1929
    • 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