The Economics of the New Deal
This lesson printed from:
Posted June 20, 2005
Author: Council for Economic Education
Posted: June 20, 2005
Updated: May 6, 2014
The stock-market crash of 1929 is generally seen as the start of The Great Depression, the worst economic downturn in the history of the United States. The Depression had devastating effects on the country. But it also served as a wake-up call for economic reform. Until the Great Depression, the U.S. government had made very few modifications to the nation's economic policies. It left the dealings of the economy and businesses to their own devices. But once the Great Depression began the nation needed help, FAST! The stock market was in shambles. Many banks closed. Farmers fell into bankruptcy and were forced off their land. Twenty-five percent of the work force, or 13 million people, were unemployed in 1932. In 1933, the Roosevelt Administration addressed the problem by making the government a key player in the nation’s economy. Using his New Deal as a force for reform, President Roosevelt created policies, agencies and standards to help alleviate serious problems. The reforms provided America with an economy that has been relatively stable for almost 80 years. Students will be prompted to think about the different programs and policies the New Deal created and how they are relevant to the role of government, and fiscal, and monetary policy, both then and now.
- Explain the economic role that government took during the Great Depression.
- Evaluate New Deal actions taken during the Great Depression.
- Explain how the function of the government was to stabilize the economy by using fiscal and monetary policies during the Great Depression.
The students should know that the Great Depression was a major turning point in the way the United States government conducted itself in the U.S. economy. The Great Depression marks the first time that the Government took an active role in the day-to-day workings of the economy. The change began in 1933 when Franklin D. Roosevelt took the office of President of the United States, with economic reform in mind. Programs and agencies such as Social Security, FDIC (Federal Deposit Insurance Corporation) and the SEC (Securities and Exchange Commission) were created under Roosevelt's “New Deal” with the American people.
Who is the FDIC?: Discusses what the FDIC is and what they do.
The Great Depression: This website provides information on the Great Depression.
New Deal History: A detailed overview of the New Deal.
New Deal Agencies: Discusses New Deal Agencies, when they were created, and what they do.
EconEdLink Glossary: This is a glossary of economic terms students can use to look up Fiscal Policy, Monetary Policy, and the Role of Government in the economy.
The New Deal Venn Diagram: Use this interactive activity to assess students knowledge of Fiscal Policy, Monetary Policy, and the Role of Government in the economy.
The New Deal Venn Diagram
Securities and Exchange Commission (SEC): Provides information about the SEC.
Tennessee Valley Authority (TVA): Provides information about the TVA.
Social Security: Provides information about Social Security.
Federal Deposit and Insurance Corporation (FDIC): Provides information about the FDIC.
Begin the lesson by conducting a class discussion. Ask the students if they have a checking or savings account. For those who answered yes, ask if they noticed an "Insured by FDIC" clause in their banking account agreement. Then ask if any student knows what FDIC means, or more importantly, what it means to them. Have the students visit "Who is the FDIC? " for a detailed description of the FDIC.
Tell the students that the FDIC is just one of many agencies created by the United States government to monitor, regulate and protect the nation's economy. It is also an institution installed under FDR's "New Deal," the most progressive economic reform period in United State's history.
The students will need to know about the condition of the American economy in the 1930s to understand the need for the New Deal. Have students view "Great Depression " to achieve this goal. The students will then need to read "New Deal " for an overview of President Roosevelt's New Deal.
What specifically did these New Deal programs do? How are they tied to the nation's economy? And through what means did they accomplish their goals? Have students view "New Deal Agencies " for a list of many New Deal programs and an explanation of their effects on the American economy.
Discuss the concepts listed in the Key Concepts section, above. You may click each concept for its definition.
Ask the students if they can identify New Deal programs that reflect these three concepts.
- Role of Government: [National Youth Administration (1935), Public Works Administration (1933), Tennessee Valley Authority (1933)]
- Fiscal Policy: [Social Security Administration (1935), National Recovery Administration (1933), Securities and Exchange Commission (1934)]
- Monetary Policy: [Federal Deposit Insurance Corporation (1933)]
To provide for further exploration of these concepts, instruct the students to complete The New Deal Venn diagram.
Assign the students to write a short research paper on a New Deal program. Below are web sites for some of the more influential programs. The may select a program that has been continued to the present day or one that was eliminated at the outset of World War II.
- United States Security and Exchange Commission (SEC)
- Social Security
- Federal Deposit and Insurance Corp. (FDIC)
- Tennessee Valley Authority (TVA)
The Great Depression is one of most important time periods in American History. It was a very trying time for the American population, but the hardships caused by the Great Depression led to vast economic changes. These changes continue to influence the United States today. How would we view the nations economy without Social Security, the SEC or FDIC? How many jobs and services are provided by the government? The next time you are walking through a park, crossing a bridge or sitting in a school building think about the possibility that these places and structures might have been a product of the New Deal.