The Great Depression: Wall Street Crash, Its Impact and Roosevelt's New Deal, ISC Class 11

What The Great Depression is about

Weightage: CISCE gives no Class XI unit weightage for ISC History. The Great Depression is topic 8 of the Class XI syllabus (World History) and can be asked anywhere in the 80-mark Paper I (Theory, 3 hours). Class XI is examined by the school, so your school sets the paper and decides how many marks each topic carries.Source: CISCE ISC History (851) syllabus, examination year 2028, Class XI

Key concepts

Causes of the Wall Street Crash (1929)

Background: the USA boomed in the 1920s with cars, electrical goods and mass production, but the boom had weak foundations.

1. Overproduction: factories and farms produced more than people could buy. Farmers suffered falling prices throughout the 1920s; by 1929 unsold goods piled up in industry too.
2. Unequal distribution of income: profits and wealth went to a small minority while wages rose slowly, so mass purchasing power was too weak to absorb output.
3. Speculation: millions bought shares expecting prices always to rise; many bought 'on the margin', paying a small deposit and borrowing the rest. Share prices rose far above the real value of companies.
4. Easy credit and weak banks: hire-purchase and loans fuelled spending; thousands of small, poorly regulated banks lent recklessly and had little reserve.
5. Tariffs and world trade: high US tariffs (Fordney-McCumber, 1922) made it hard for other countries to sell to the USA and earn dollars; they retaliated, limiting US exports.
6. International debts: Europe owed the USA war debts; Germany paid reparations with American loans (Dawes Plan, 1924). The whole circle depended on US lending continuing.
7. Laissez-faire governments under Presidents Harding, Coolidge and Hoover did little to regulate the stock market or banks.

The Crash: confidence broke in October 1929. On 'Black Thursday' (24 October) panic selling began, and on 'Black Tuesday' (29 October) about 16 million shares were sold; prices kept falling for three years.

Worked example

[4] Explain four causes of the Wall Street Crash of 1929. (Understanding)

Try it first, then show the solutionSolution

1. Overproduction in industry and agriculture; unsold goods - 1 mark.
2. Unequal income: weak mass purchasing power - 1 mark.
3. Speculation and buying on the margin pushed share prices above real values - 1 mark.
4. Weak banks, easy credit, tariffs and laissez-faire government - 1 mark.

Answer: Factories and farms produced more than Americans could buy, because most of the new wealth went to a few while wages rose slowly. Meanwhile millions speculated in shares, often on borrowed money, pushing prices far above real values, and weak, unregulated banks lent freely while high tariffs and a laissez-faire government did nothing to correct the imbalance, so when confidence broke in October 1929 prices collapsed.

Impact on the USA

1. Collapse of share values: shareholders and banks that had lent for speculation were ruined.
2. Bank failures: as borrowers defaulted and depositors rushed to withdraw, thousands of banks failed (over 4,000 had closed by 1933), wiping out savings.
3. Business collapse: around 110,000 companies collapsed between 1929 and 1932; industrial production nearly halved.
4. Mass unemployment: by 1932-33 about a quarter of the workforce, some 13 million people, was out of work; wages fell for those still employed.
5. Farmers: prices fell further; many could not repay loans and lost their farms; in the mid-1930s the Dust Bowl drought drove families from the Great Plains.
6. Social distress: hunger, breadlines and soup kitchens; shanty towns of the homeless called 'Hoovervilles'; migration in search of work.
7. Political: President Hoover believed recovery would come by itself and relied on limited measures; he was blamed and lost the 1932 election to Franklin D. Roosevelt.
8. World effects: US banks recalled foreign loans and the Hawley-Smoot Tariff (1930) cut imports, spreading the Depression worldwide.

Worked example

[4] Describe the impact of the Depression on the people of the USA. (Recall)

Try it first, then show the solutionSolution

1. Bank failures wiped out savings - 1 mark.
2. Business collapse; industrial production nearly halved - 1 mark.
3. Mass unemployment, about a quarter of workers by 1932-33 - 1 mark.
4. Farm foreclosures; Hoovervilles, breadlines; Hoover defeated (1932) - 1 mark.

Answer: Thousands of banks failed and families lost their savings; businesses collapsed and industrial output nearly halved; by 1932-33 about a quarter of the workforce was unemployed; farmers lost their land as prices fell; and the homeless gathered in 'Hoovervilles' and queued at soup kitchens, so voters turned against Hoover in 1932.

Impact on Germany

1. Dependence on US loans: since the Dawes Plan (1924) Germany's recovery and reparations had relied on American loans. After the Crash US banks demanded repayment, and lending stopped.
2. Industrial collapse: by 1932 industrial production fell to about 40 per cent of the 1929 level.
3. Unemployment rose to about 6 million by 1932; young people and the middle classes faced ruin; bank failures in 1931 deepened the crisis.
4. Government crisis: the coalition government fell in 1930; Chancellor Bruning cut spending and wages and governed by presidential emergency decrees (Article 48), which made the crisis worse and weakened democracy.
5. Rise of extremism: desperate voters turned to the Nazis and Communists. The Nazi share of the vote rose from 2.6 per cent in 1928 to over 37 per cent in July 1932, making them the largest party; Hitler became Chancellor in January 1933.
6. Reparations were suspended (Hoover Moratorium, 1931) and effectively ended (Lausanne, 1932), but too late to save the Republic.

Worked example

[4] Why was Germany hit especially hard by the Great Depression? (Analysis)

Try it first, then show the solutionSolution

1. Economy depended on short-term American loans since 1924 - 1 mark.
2. Loans recalled after the Crash; industry collapsed to 40 per cent of 1929 output - 1 mark.
3. Unemployment reached about 6 million by 1932; bank failures - 1 mark.
4. Weak Weimar governments; rule by decree; extremists gained - 1 mark.

Answer: Germany's recovery after 1924 rested on short-term American loans, so when US banks recalled them after the Crash, industry collapsed to about 40 per cent of its 1929 output and unemployment rose to about 6 million by 1932. Weak coalition governments, ruling by emergency decree and cutting spending, could not cope, and desperate voters turned to the Nazis and Communists.

Impact on Japan

1. Collapse of the silk trade: raw silk, Japan's chief export, went mainly to the USA; American demand and prices collapsed, ruining silk farmers.
2. Rural distress: rice prices also fell; peasant families, especially in the north, fell into debt and hunger.
3. Export losses: exports fell sharply as world trade shrank and other countries raised tariffs; factories closed and unemployment rose.
4. Loss of faith in party government: politicians and the big business houses (zaibatsu) were seen as corrupt and indifferent to the poor; the return to the gold standard (1930) deepened the slump.
5. Rise of militarism: army officers, many from rural families, argued that Japan needed its own empire for raw materials and markets. The army seized Manchuria in 1931, and nationalist violence against politicians increased; military influence over government grew through the 1930s.

Worked example

[4] How did the Great Depression affect Japan? (Understanding)

Try it first, then show the solutionSolution

1. Collapse of silk exports to the USA - 1 mark.
2. Fall in rice prices; rural poverty and debt - 1 mark.
3. Shrinking world trade and foreign tariffs hit industry - 1 mark.
4. Loss of faith in parties and zaibatsu; army turned to expansion (Manchuria 1931) - 1 mark.

Answer: The collapse of American demand ruined Japan's silk exports and the farmers who produced silk; rice prices also fell, spreading debt and hunger in the countryside; shrinking world trade and foreign tariffs hit industry; and people lost faith in party politicians and the zaibatsu, while the army argued for an empire and seized Manchuria in 1931.

Roosevelt and the New Deal: aims

Franklin D. Roosevelt won the presidential election of November 1932 and took office in March 1933, declaring that 'the only thing we have to fear is fear itself'. He promised a 'New Deal for the American people'.

Aims (the 'three Rs')
1. Relief: immediate help for the unemployed, the hungry and the homeless.
2. Recovery: to revive industry and agriculture, raise prices and wages, and create jobs.
3. Reform: to change the economic system so that a crash and depression could not happen again, especially in banking and the stock market, and to give ordinary people security.

Other aims and methods

• Restore confidence in banks and in government (he spoke to the people directly in radio 'fireside chats').
• Accept that the federal government must intervene in the economy instead of leaving everything to the market.
• Use government spending on public works to create jobs, even at the cost of a budget deficit.

Worked example

[4] What were the aims of Roosevelt's New Deal? (Recall)

Try it first, then show the solutionSolution

1. Relief for the unemployed and poor - 1 mark.
2. Recovery of industry and agriculture; jobs - 1 mark.
3. Reform of banking and markets to prevent another crash - 1 mark.
4. Restore confidence; active role of the federal government - 1 mark.

Answer: The New Deal aimed at relief for the unemployed and needy, recovery of industry and farming so that jobs and incomes returned, and reform of banking and the stock market so that another crash could not happen. It also aimed to restore confidence and established the principle that the federal government should actively manage the economy.

Measures of the New Deal

The 'Hundred Days' (March-June 1933) and after:

Banking and finance

• Emergency Banking Act (1933): all banks were closed for a 'bank holiday'; only sound ones reopened under federal supervision.
• Glass-Steagall Act (1933): separated ordinary and investment banking and created the Federal Deposit Insurance Corporation to protect savings.
• Securities and Exchange Commission (1934) to regulate the stock market.

Relief and jobs

• Civilian Conservation Corps (CCC, 1933): young men employed in forestry, flood control and conservation.
• Federal Emergency Relief Administration (FERA, 1933): grants to states for relief.
• Public Works Administration (PWA) and later the Works Progress Administration (WPA, 1935): roads, schools, bridges, airports and even arts projects, employing millions.

Recovery

• Agricultural Adjustment Act (AAA, 1933): paid farmers to reduce production so that prices would rise.
• National Industrial Recovery Act (NIRA, 1933): codes of fair competition on prices, wages and hours; workers' right to join unions.
• Tennessee Valley Authority (TVA, 1933): dams for flood control and cheap electricity, regenerating a poor region across several states.

Reform (the 'Second New Deal', 1935)

• Social Security Act (1935): old-age pensions and unemployment insurance.
• Wagner Act (1935): protected workers' right to organise and bargain collectively.

Opposition and limits: the Supreme Court struck down the NIRA (1935) and the first AAA (1936); business leaders called it socialism, while others said it did too little. Unemployment fell but stayed high until rearmament for World War II. Yet it restored confidence, saved the banking system and created a lasting welfare framework.

Worked example

[4] Explain four measures taken under the New Deal. (Recall)

Try it first, then show the solutionSolution

1. Emergency Banking Act and Glass-Steagall Act (deposit insurance) - 1 mark.
2. CCC and WPA: jobs through public works - 1 mark.
3. AAA and NIRA: recovery of farming and industry - 1 mark.
4. TVA; Social Security Act (1935) - 1 mark.

Answer: The Emergency Banking Act and the Glass-Steagall Act reopened sound banks and insured deposits; the CCC and the WPA gave jobs on conservation and public works; the AAA paid farmers to cut output while the NIRA set codes for industry; and the TVA built dams and power stations in a poor region, while the Social Security Act of 1935 introduced pensions and unemployment insurance.

The Great Depression in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Causes of the Wall Street Crash and Impact on the USA, Germany and Japan
• Roosevelt and the New Deal: Aims and Measures

The Great Depression: key facts

Boom foundations

Fordney-McCumber Tariff 1922; Dawes Plan 1924

Tariffs and US loans to Germany.

Crash

Black Thursday 24 October 1929; Black Tuesday 29 October 1929

About 16 million shares sold on 29 October.

USA impact

Over 4,000 banks closed by 1933; about 110,000 companies collapsed 1929-32

About a quarter of the workforce unemployed.

Germany impact

Industry 40 per cent of 1929 level; 6 million unemployed by 1932

Nazi vote 2.6 per cent (1928) to over 37 per cent (July 1932).

Japan impact

Silk exports collapse; Manchuria seized 1931

Rural distress; army's influence grows.

New Deal

FDR elected 1932, took office March 1933; Hundred Days 1933; Second New Deal 1935

Relief, Recovery, Reform.

How the school exam asks The Great Depression

The question patterns to expect, and the method that works for each.

Tricks to remember The Great Depression

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Causes: 'O-U-S-C-T-D-L'

  Overproduction, Unequal income, Speculation, Credit and banks, Tariffs, Debts, Laissez-faire.

  Use it when: Seven causes to choose from.

• Three Rs

  Relief (CCC, FERA, WPA), Recovery (AAA, NIRA, TVA), Reform (Glass-Steagall, SEC, Social Security, Wagner).

  Use it when: Sorting New Deal measures by aim.

• Three countries, three hits

  USA: banks and jobs; Germany: loans recalled, Hitler; Japan: silk and soldiers.

  Use it when: Impact answers.

The Great Depression: exam-level solved questions

Ordered from exam level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section D style)

Read the situation, then answer every part. In a school exam set on the board pattern this is a 8-mark question split into 1 + 1 + 3 + 3 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in The Great Depression

The slips examiners see most often, and what to write instead.

• ✗Mistake: Describing the Crash itself as its cause

  Panic selling was the event, not the underlying cause.

  ✓Do this: Give structural causes first (overproduction, income, speculation, banks, tariffs).

  Usually costs: 2 marks.

• ✗Mistake: Impact answers about the USA only

  The syllabus asks for the USA, Germany and Japan.

  ✓Do this: Plan three sections with at least two points each.

  Usually costs: Up to 4 marks.

• ✗Mistake: Listing New Deal agencies without saying what they did

  Initials alone earn little credit.

  Wrong working

  CCC, AAA, TVA, NRA.

  Right working

  CCC: jobs for young men in conservation; AAA: paid farmers to cut output; and so on.

  ✓Do this: Name, year and purpose for each.

  Usually costs: 2 marks.

• ✗Mistake: Saying the New Deal ended the Depression

  Unemployment stayed high until rearmament.

  ✓Do this: Say it relieved and reformed, but full recovery came with the war economy.

  Usually costs: 1 mark.

• ✗Mistake: Confusing Black Thursday and Black Tuesday

  Both in the same week.

  ✓Do this: Thursday 24 (panic begins), Tuesday 29 (collapse).

  Usually costs: 1 mark.

Practice questions on The Great Depression

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · Very short answerExam level

   What was meant by buying shares 'on the margin'?

   Hint

   Deposit and loan.

   Answer

   Paying a small part of the share price and borrowing the rest, expecting to repay from rising prices.

2. Q2 · 1 mark · Very short answerExam level

   What were 'Hoovervilles'?

   Hint

   Named after the President.

   Answer

   Shanty towns of the homeless during the Depression.

3. Q3 · 1 mark · MCQExam level

   Which New Deal agency built dams and power stations in a poor river valley?
   (a) CCC
   (b) WPA
   (c) TVA
   (d) AAA

   Hint

   Tennessee.

   Answer

   (c) TVA (Tennessee Valley Authority).

4. Q4 · 1 mark · Very short answerHarder exam level

   Which 1924 plan arranged American loans to Germany?

   Hint

   Named after an American banker.

   Answer

   The Dawes Plan.

5. Q5 · 4 marks · Short answerHarder exam level

   [4] Explain how unequal distribution of income contributed to the Depression.

   Hint

   Production versus purchasing power.

   Answer

   (1) Profits and wealth went to a small minority. (2) Wages rose much more slowly than productivity. (3) Most people could not afford the goods being produced, so stocks piled up. (4) The rich put surplus money into speculation rather than spending, inflating share prices.

6. Q6 · 4 marks · Short answerHarder exam level

   [4] How did American tariff policy worsen the world economic situation?

   Hint

   Fordney-McCumber, Hawley-Smoot.

   Answer

   (1) High tariffs (1922) made it hard for Europe to sell goods in the USA. (2) Without dollars, countries struggled to repay war debts and buy US goods. (3) They retaliated with their own tariffs, reducing US exports. (4) The Hawley-Smoot Tariff (1930) deepened the collapse of world trade after the Crash.

7. Q7 · 4 marks · Short answerHarder exam level

   [4] Why did Roosevelt's New Deal face opposition?

   Hint

   Court, business, left, states.

   Answer

   (1) The Supreme Court struck down the NIRA (1935) and the AAA (1936) as beyond federal powers. (2) Business leaders called it socialism and resented regulation and taxes. (3) Critics on the left said it did too little for the poor. (4) Some argued that budget deficits and federal power threatened American traditions of self-reliance.

8. Q8 · 4 marks · Short answerHOTS / competency

   [4] Compare the responses of Hoover and Roosevelt to the Depression.

   Hint

   Laissez-faire versus intervention.

   Answer

   (1) Hoover believed in limited government and expected the economy to recover by itself. (2) He relied on voluntary action and some limited measures and opposed direct federal relief. (3) Roosevelt accepted large-scale federal intervention: relief, public works and regulation. (4) He was willing to run deficits and speak directly to the people, restoring confidence that Hoover had lost.

9. Q9 · 4 marks · Short answerHOTS / competency

   [4] 'The Depression was a world crisis made in America.' Discuss.

   Hint

   US loans, tariffs; other weaknesses.

   Answer

   (1) The Crash began in the USA, and US recall of loans spread it to Germany and Europe. (2) US tariffs choked world trade. (3) But weaknesses existed elsewhere: falling farm prices worldwide, war debts and reparations, and Europe's dependence on short-term credit. (4) So the USA triggered and spread it, but it fed on weaknesses in the whole post-war economy.

10. Q10 · 8 marks · Long answerHarder exam level

    [8] (a) State the aims of the New Deal. [4]
    (b) Explain four measures taken to achieve them. [4]

    Hint

    Three Rs plus confidence; one measure per R.

    Answer

    (a) (1) Relief for the unemployed and poor. (2) Recovery of industry and farming. (3) Reform of banking and markets. (4) Restoring confidence through an active federal government. (b) (1) Emergency Banking Act and Glass-Steagall Act stabilised banks and insured deposits. (2) CCC and WPA created millions of jobs. (3) AAA and NIRA aimed at recovery of farm prices and industry; TVA developed a poor region. (4) Social Security and Wagner Acts (1935) gave pensions, unemployment insurance and union rights.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.Who was US President when the Crash happened?Show answer

   Herbert Hoover.

2. 2.What did the Glass-Steagall Act create?Show answer

   The Federal Deposit Insurance Corporation (and separation of banking types).

3. 3.What were the 'Hundred Days'?Show answer

   The first months of Roosevelt's presidency (1933) when many New Deal laws were passed.

4. 4.Which Act of 1935 introduced old-age pensions?Show answer

   The Social Security Act.

5. 5.What was Japan's main export hit by the Depression?Show answer

   Raw silk.

6. 6.What did the AAA do?Show answer

   Paid farmers to reduce production so that prices would rise.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Causes: overproduction, unequal income, speculation and margin buying, easy credit and weak banks, tariffs, debts, laissez-faire.
• ☐Crash: 24 and 29 October 1929.
• ☐USA: 4,000+ banks closed by 1933; 110,000 companies collapsed; a quarter unemployed; Hoovervilles; Dust Bowl.
• ☐Germany: loans recalled; industry 40 per cent; 6 million unemployed; Nazis 37 per cent in July 1932.
• ☐Japan: silk and rice collapse; exports fall; army seizes Manchuria 1931.
• ☐New Deal: relief (CCC, FERA, WPA), recovery (AAA, NIRA, TVA), reform (banking, SEC, Social Security, Wagner).

The Great Depression: frequently asked questions