"The Bubble Bursts": Causes of the Great Depression
- Rosie Jayde Uyola
- 23 hours ago
- 4 min read
Target: I can explain the causes of the Great Depression by comparing the practice of "buying on margin" to the panic of a bank run.
Key Vocabulary
The Great Depression (1929–1939): The worst economic downturn in history. Millions of people lost their jobs, savings, and homes.
Buying on Margin: Borrowing money to buy stocks. People only paid 10% of the price and borrowed the rest, hoping the stock price would go up so they could pay back the loan and keep the profit.
Black Tuesday (October 29, 1929): The day the Stock Market crashed. Stock prices dropped drastically, and everyone tried to sell at once.
Bank Run: When terrified customers all rushed to the bank at the same time to withdraw their money. The banks ran out of cash and collapsed, wiping out people's life savings.
Part 1: Do Now (5 minutes)
Directions: Read the prompt below and write a 5-8 sentence response.
Prompt: Imagine you want to buy a pair of rare sneakers for $100. You only have $10, so you borrow $90 from a friend, promising to pay them back next week. You plan to sell the sneakers for $200 and keep the profit. But suddenly, the sneaker market crashes. The shoes are now only worth $5. You still owe your friend $90, but you have no money left. How much trouble are you in? Is it dangerous to gamble with borrowed money? |
Sentence Starter: I am in huge trouble because... This shows that gambling with borrowed money is dangerous because if the price drops, you still...
Part 2: Analyzing the Sources
Directions: Analyze the two documents below and then answer the questions that follow.
Source 1: "The Crash," Account of Black Tuesday (1929)
Original Text | Simplified Text |
"Billions of dollars in open market values were wiped out of this nation's prosperity today... It was a day of terror in Wall Street. The selling pressure was wholly without precedent... Traders on the floor of the Stock Exchange screamed and fought to sell their shares... But there were no buyers. The bottom had fallen out of the market. Men who were millionaires at 10:00 AM were paupers by 4:00 PM." | "Billions of dollars of American wealth disappeared today... It was a day of total terror on Wall Street. The panic to sell stocks was unlike anything we have ever seen… Traders screamed and fought each other to sell their stocks... But nobody wanted to buy them. The market had completely collapsed. Men who were millionaires in the morning were poor beggars by the afternoon." |
Source 2: Photograph - "The Bank Run" (1930)
Context: After the crash, people panicked and ran to their banks to get their cash out. But the banks had loaned the money to investors who lost it in the crash.
Description: The photo shows a massive crowd of anxious men and women pressing against the closed doors and windows of the "American Union Bank" in New York City. They are desperate to get inside to withdraw their savings. A police officer stands in front of the door, telling them the bank has no money left.
Analysis Questions
Directions: Answer the writing questions and the two Multiple Choice questions.
1. According to Source 1, why did men turn from "millionaires" to "paupers" (poor people) in just a few hours?
Sentence Starter: They became poor in hours because the stock prices... and there were no...
2. Look at Source 2. If you were in that crowd and the bank manager came out and said, "Sorry, your money is gone," how would that affect your trust in the American economy?
Sentence Starter: If I was told my life savings were gone, I would lose all trust in the economy because... This helps explain why the Depression lasted so long, because people stopped...
Regents-Style Multiple Choice
3. Which economic practice became significantly more widespread during the 1920s and eventually contributed to the Stock Market Crash?
(1) Government regulation of the banking system
(2) Buying stocks on margin (borrowing money to speculate)
(3) High taxes on business profits
(4) Increased trade with the Soviet Union
4. The "Bank Run" shown in Source 2 occurred because:
(1) The government ordered all banks to close permanently
(2) Banks had invested their customers' deposits in the stock market, and when the market crashed, the money was lost
(3) People wanted to withdraw money to buy new houses in the suburbs
(4) The Federal Reserve printed too much money, causing hyperinflation
Part 3: Exit Ticket (5 minutes)
Directions: Answer the following prompt in a complete paragraph (5-8 sentences).
Prompt: Using evidence from both sources, explain how the Great Depression started. How did risky behavior like buying on margin lead to the panic shown in the Bank Run (Source 2)? |
Sentence Starter: The Great Depression began because people were taking dangerous risks with money. As Source 1 describes, people were buying stocks until the market... When prices crashed, "millionaires became..." This led to the scene in Source 2, where people rushed to... This was a disaster because the banks had...
