The Roaring 20s

• Industrial productivity increased and manufacturers paid large dividends to investors, spurring reinvestment. However, as workers' personal income rose, the economy shifted from durable goods to consumer products and entertainment. While surpluses of durable goods developed, consumers went into debt buying luxury goods on credit.
  
  

Financial Issues

• The stock market's rapid growth attracted speculators who bought stocks on credit and then sold them when their value rose. Fueled by these speculative investments, prices on the New York Stock Exchange rose more than 800 percent between 1921 and 1929.
  
  

The Great Depression

• The 1929 "Black Tuesday" stock market crash triggered the Great Depression. By 1933, the worst year, the gross domestic product, or total of all goods and services, was down more than 25 percent. Industrial production and farm profits decreased by 50 percent; 35 percent of the country's banks failed and 12 to 16 million people lost work.
  
  

Early Response

• President Herbert Hoover relied on business and labor to maintain production. When the crisis worsened, he approved aid for business recovery and preventing foreclosures. However, he did little to alleviate unemployment and in 1932, voters elected Franklin Roosevelt.
  
  

New Deal

• The New Deal was a series of programs created by Roosevelt that improved banking and financial regulations, put people to work and gave money to the jobless. Although it had mixed results, the New Deal created the modern welfare state.