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Financial Collapse - Coggle Diagram
Financial Collapse
The Stock Market Crashes
New York City's Wall Street was the financial capital of the World
There were soaring prices for stock at exchange
Middle income people bought stocks
They paid a small percentage of a stock's price as a down payment and borrow the rest
Investors had no money to pay off the loan
Investors started selling stocks hoping prices would go down
Stock prices started decreasing like a downward slide
Everyone wanted to sell stocks and no one wanted to buy.
The market collapsed because prices were lock a 16 million shares of stock were sold
Panic
Supply and Demand
How did Margin buying contribute to the stock market crash?
A Flawed US Economy
Weaknesses in the US economy caused serious problems
Uneven distribution of wealth, overproduction by business and agriculture, and the fact that many americans were buying less
By 1929 American factories were turning out nearly half of the world's industrial goods.
The rising productivity led to enormous profits, though the wealth not evenly distributed
the richest 5% of the population received 33% of all personal income in 1929
Yet 60% of all American families earned less than $2,000 per year so most families were too poor to buy the goods that were produced
Since they were unable to sell their goods store owners cut back on their orders from factories
In turn factories reduced production and laid off workers = a downward economic spiral
During the 1920s over production affected American farmers too
Scientific farming methods and new farm machinery dramatically increased crop yields
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Concept: Distribution
What would have happened if the economy continued a spiral?