Activity #1 – Student Handout (PDF 8k – 1 page)
Clue Sheet #1 – Student Handout (PDF 10k – 3 pages)
Clue Sheet #1 – Teacher’s Guide
Tell the students to read Activity #1. It focuses on the contrasts between the 1920s and the 1930s and poses the mystery that is central to this lesson: What caused the Great Depression? After the students read the mystery, send the students to the Almanac: History & Government website. Assign each student a five year interval (1920-1924, 1925-1929, 1930-1935). Have each student research these five years on the site and complete that section of Clue Sheet #1. Place students in groups of three, one for each time period, to share the information with one another until every student has completed Clue Sheet #1. In a class discussion, have them answer the following questions:
- What was happening to consumer prices during the 1920s? 1930s?
[During the 20s prices remained relatively stable. After 1929, they dropped dramatically.]
- Which groups would be most negatively affected by the changes in prices you identified?
[Farmers and businesses suffered because they got such low prices and were forced to leave the land, lay off workers, and many closed their businesses for good.]
- What was the trend in the unemployment rate in the 20s? 30s?
[In the 20s, the rate was fairly low, down to 1.8% in 1926, and stable. The rate jumps dramatically in the 30s.]
- Why was that occurring in the 30s?
[Income had fallen so the people had much less money to buy the goods and services businesses produced. To cut back on production, businesses had to keep laying people off. There were less jobs available, households’ income decreased again and again causing additional layoffs.]
- What was happening to spending by the federal government in the 20s? 30s?
[Declined steadily during the 20s and into early 30s. Then federal spending rose significantly from 1933-1935]
- What events might explain government spending patterns in the 20s and 30s?
[WWI ended so the need for govt. spending declined sharply in the 20s. Jobs related to the production of public goods and services declined. When President Franklin Roosevelt was elected he began to use federal spending to put people back to work to increase income so that households would be willing and able to purchase what businesses produced.]
- What events occurred in the U.S. or the world that would affect peoples’ lives directly or indirectly in the 20s? 30s? Explain that impact of some of these events.
[After WWI there was a wave of immigrants that came to the U.S. for work. This caused problems on the domestic front and sparked anti-immigrant feelings and policies. The punitive nature of the Treaty of Versailles caused major problems in Europe for the German economy, the U.S. wouldn’t sign it, nor join the League of Nations. International trade was disrupted. During the decade of the 20s, the punitive nature of the Versailles Treaty and the competing philosophies of the socialists, communists, and fascists led to increasing unrest in Europe. The 1920s and 30s saw a great deal of innovation and inventions that made many new goods and services available. . With the developments in the communications field and in entertainment, the seeds of major new industries began that changed the way people relate and what they knew about areas other than their own location. Medical discoveries increased people’s attention to health and longevity and spawned other new businesses. Productivity increased significantly which reduced costs to businesses which stabilized prices as reflected by the CPI during the 20s. After the recovery from a recession following WWI, the U.S. was at full employment from 1923-1929. Government spending also remained very stable during the 20s and until after the election of FDR in 1932. President’s Roosevelt’s programs to hire people for government jobs increased government spending dramatically. These are just some of the connections related to the economic conditions in the 20s and 30s.]
Clue Sheet #2 – Student Handout
Clue Sheet #2 – Teacher’s Guide
Use the same groups of three and assign each person in the group a section from Clue Sheet #2. (Labor and employment, Poverty and Income, and Economy and Government) The Internet sites for each section can be found on Clue Sheet #2. As the students do the research, have them complete Clue Sheet #2, which is a series of questions, so that they can suggest how these factors contributed to the Great Depression. The sites deal with labor and employment, poverty and income, and the economy and government. When they have finished, each group shares their answers and then the class answers the following questions:
- How are the overall employment trends related to income?
[The lower the unemployment rate, the higher the level of income. When unemployment increases, total income drops.]
- Why was farm income depressed throughout the 1920s?
[Total demand for food decreased while the supply remained relatively stable causing food prices to fall reducing farm income lower than everyone else’s.]
- What caused the trends in government spending during this time?
[Government spending decreased when WWI ended. Many believed the federal budget should be balanced and the government had accumulated large debts during the war.]
Assign each member of the group one of the three articles listed below taken from the Top 25 economic events. Each clue sheet contains the article and a series of questions. Students should read the article and answer the questions. Students in the group then share the information with each other.
Clue Sheet #3a – Henry Ford Begins Production of the Model T in Highland Park
Clue Sheet #3a – Teacher’s Guide
Clue Sheet #3b – The Federal Reserve Board (PDF 10k – 3 pages)
Clue Sheet #3b – Teacher’s Guide
Clue Sheet #3c – The Stock Market Crash of 1929 (PDF 10k – 3 pages)
Clue Sheet #3c – Teacher’s Guide
Have the class then answer the following:
- How did innovation and Ford’s leadership in employee relations fuel the economic growth during the 1920s?
[Many new products were invented, old ones refined, and many were available to average citizens who saw wages going up. Jobs were created and income increased fueling further investment and expansion.]
- What role did the Federal Reserve System play in this era?
[Money for expansion came from savings and stock speculation. The Fed tightened the money supply to reduce the speculation, which decreased the ability of the consumers and businesses to borrow. When the market collapsed, the Fed remained neutral rather than trying to stimulate the declining economy.]
- How did the stock market crash accelerate the economic slide into the Great Depression?
[Demand for many goods and services slowed in the late 20s, which reduced corporate profits. Investors became nervous and began to sell their stock decreasing the prices of many stocks. Since many had bought the stock on credit, they could not pay back those loans because the stocks were now worth less than the loans. As prices plummeted and they lost their savings, many banks that had loaned them the money to buy stock failed. Their customers lost all the deposits they had in those banks. Between Nov. and Dec. of 1929, $30 billion was lost to the whole economy for spending, savings, and taxes.]
Using the car as an example, have students brainstorm what businesses began or grew because of the mass production of the automobile. (These would include suppliers to both industries, capital equipment manufacturers, producers of complementary goods, construction industry.)
Point out to students the following:
- Suppliers provide all the parts and materials needed to make a car and the car companies assemble those parts.
- Capital goods are the factory, tools, and the machinery used in production.
- Complementary goods are ones that develop because cars became the main means of transportation. Examples of these would be roads, gas stations, hotels, restaurants, repair shops, housing, etc.
Have students complete the Interdependence Web Activity. Within this interactive activity, students will drag the businesses to the column for suppliers, complementary goods/services, or capital goods to see how many businesses are related to one another.
After the students have completed the interdependence web, the teacher then reviews what they have discovered about economic interdependence and the Great Depression by discussing the following:
- What types of jobs does any business need to function?
[production workers, machinists, office staffs, managers, salespeople, maintenance staff, transport workers, finance people, etc.]
- When these workers earn income from their jobs, what are the three major things that workers do with their income?
[spend, pay taxes, and save]
- When income declines, what happens to the three ‘things’ you identified in the previous question?
[All three, spending on goods and services, taxes, and savings will decline. If people lose their savings first, spending declines then also causing more layoffs and another decrease in jobs.]
- When demand for cars declined in the late 20s, what kinds of companies business declined?
[list all the ones from the web]