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Key Market Factors
Transcript of Key Market Factors
How did each of these contribute to Stock Market instability in 1929? Supply and Demand Overproduction Unemployment Buying on Margin Sticky Money Hoarding Both Supply and Demand
affect the price of goods and services.
When Supply is high, prices drop
When Demand is low, prices drop
When Supply is low, prices rise
When Demand is high, prices rise
What impact would supply and demand
have had on the value of
sock prices in 1929? During WWI, American farmers had to produce grain and crops to feed millions of men in th American Army. No matter how much they produced, the government bought it all for the troops. After the war, who bought all the grain? What can you infer about the supply and demand? What happened to the price? As millions of soldiers returned from war, they found immigrants and women had taken their jobs. Although many found work in the growing economy, much of that work was dependent on a robust economy. What happened to their jobs if the economy slowed down and people quit buying? Because the market grew so fast, nobody wanted to miss out on the "gravy train", so regardless of their income, they found a way to buy stocks. One way was to buy on margin. That meant purchasing a large amount of stock with only a small downpayment. Great if the market continues to rise - What if it doesn't? How do you repay a devalued stock that you don't completely own? When the economy needs money to expand, the Federal Reserve Bank loans more to regular banks. However more available money leads to its devaluation. This is called inflation. With inflation, prices of goods and services rise. When interest prices rise and money is no longer available, prices "stick" and things become unaffordable. Simply means people hoard
their money instead of spending it.
What impact does this have on the economy?