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Wall Street Crash: Causes and Impact | ISC Class 11 History

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HistoryISC Class 11 · The Great Depression

Causes of the Wall Street Crash and Impact on the USA, Germany and Japan (ISC Class 11 History)

Updated 17 October 2026 · Fact-checked

The 1929 Wall Street Crash followed overproduction, unequal incomes, speculation and buying on the margin, weak banks, tariffs, a tangle of war debts and loans, and laissez-faire government. The Depression brought mass unemployment in the USA, the collapse of loan-dependent Germany that helped the Nazis rise, and the ruin of Japan's silk trade that strengthened militarism.

Notice that many separate weaknesses all feed into one crash, which then spreads three different kinds of damage to the USA, Germany and Japan.

Illustration drawn for QuestionBuddy.

Understand Causes of the Wall Street Crash and Impact on the USA, Germany and Japan

Causes. (1) Overproduction: factories and farms produced more than people could buy; farm prices fell all decade. (2) Unequal income: profits to a few, slow wages, weak mass buying power. (3) Speculation: millions bought shares expecting rises, many on the margin with borrowed money, driving prices above real value. (4) Easy credit and weak banks: hire-purchase and loans; thousands of small, poorly regulated banks. (5) Tariffs (Fordney-McCumber, 1922) hampered foreign sales and brought retaliation. (6) International debts: Germany paid reparations with American loans (Dawes Plan, 1924), so the circle depended on US lending. (7) Laissez-faire under Harding, Coolidge and Hoover. Crash: panic selling on Black Thursday (24 October 1929) and Black Tuesday (29 October), when about 16 million shares were sold; prices kept falling for three years.

USA. Share values collapsed; over 4,000 banks had closed by 1933; around 110,000 companies collapsed from 1929 to 1932 and industrial output nearly halved; by 1932-33 about a quarter of the workforce, some 13 million, was jobless; farm foreclosures and the Dust Bowl; breadlines and Hoovervilles; Hoover relied on limited measures and lost to Roosevelt in 1932; US banks recalled foreign loans and the Hawley-Smoot Tariff (1930) spread the slump.

Germany. US loans stopped; industrial output by 1932 was about 40 per cent of 1929; unemployment about 6 million; the coalition government fell in 1930 and Bruning governed by emergency decrees; the Nazi vote rose from 2.6 per cent in 1928 to over 37 per cent in July 1932; Hitler became Chancellor in January 1933; reparations were suspended (Hoover Moratorium, 1931) and effectively ended at Lausanne (1932).

Japan. The silk trade, mostly to the USA, collapsed; rice prices fell and rural debt and hunger grew; exports shrank; distrust of party politicians and zaibatsu; the return to the gold standard (1930) deepened the slump; army officers argued for an empire for raw materials and markets; Manchuria was seized in 1931 and military influence grew.

Causes of the Wall Street Crash and Impact on the USA, Germany and Japan: key facts

Crash dates
24 October 1929: Black Thursday | 29 October 1929: Black Tuesday, about 16 million shares
USA figures
  • Over 4,000 banks closed by 1933
  • About 110,000 companies collapsed 1929-32
  • About 13 million jobless, about a quarter of the workforce
Germany figures
  • Industrial output about 40% of 1929 level
  • About 6 million unemployed
  • Nazi vote 2.6% (1928) to over 37% (July 1932)
Japan
  • Silk exports collapse
  • Manchuria 1931
  • Militarism grows

How to answer Causes of the Wall Street Crash and Impact on the USA, Germany and Japan questions

Questions are 4-mark causes or impact items and an 8-mark question linking causes and impact; numerical items use chapter figures.

  1. 1List causes in a numbered sequence from the 1920s boom.
  2. 2State impact by country using figures.
  3. 3Link the German Nazi rise and Japanese militarism to the slump.
  4. 4Close with a one-line judgement.

Causes of the Wall Street Crash and Impact on the USA, Germany and Japan in real life

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

Workforce size

Suppose 13 million jobless are said to be about a quarter of the workforce.

Estimate the total workforce.

Try it first, then show the solutionSolution
  1. If 13 million is one quarter, total = 13 x 4.
  2. Total = 52 million.

Answer: About 52 million.

Memory hook: Four times the quarter.

Nazi vote growth

Suppose a party went from 2.6 per cent to 37 per cent of the vote.

Find the approximate multiple.

Try it first, then show the solutionSolution
  1. 37/2.6 = 14.2.
  2. The share rose about fourteen-fold.

Answer: About 14.2 times.

Memory hook: New over old.

Tricks to remember Causes of the Wall Street Crash and Impact on the USA, Germany and Japan

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

  • OUSBTL

    Overproduction, Unequal incomes, Speculation, Banks, Tariffs, Loans.

    Use it when: Causes.

  • Black 24, Black 29

    Black Thursday 24 October, Black Tuesday 29 October 1929.

    Use it when: Crash dates.

Causes of the Wall Street Crash and Impact on the USA, Germany and Japan: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Buying on the margin · 1 mark · MCQBoard level

Buying shares "on the margin" meant:
(a) paying the full price in cash
(b) paying a small deposit and borrowing the rest
(c) selling shares short
(d) buying only government bonds

Try it first, then show the solutionSolution
  1. Borrowed money.

Answer: (b) Paying a small deposit and borrowing the rest.

Example 2: Crash · 3 marks · Short answerBoard level

State the dates of Black Thursday and Black Tuesday and the number of shares sold on Black Tuesday.

Try it first, then show the solutionSolution
  1. Black Thursday: 24 October 1929.
  2. Black Tuesday: 29 October 1929.
  3. About 16 million shares sold on Black Tuesday.

Answer: 24 and 29 October 1929; about 16 million shares.

Example 3: Causes · 4 marks · Long answerHarder board level

Explain four causes of the Wall Street Crash of 1929.

Try it first, then show the solutionSolution
  1. Overproduction and unsold goods.
  2. Unequal income limiting mass purchasing power.
  3. Speculation and buying on the margin.
  4. Weak banks, tariffs and the dependence on US loans for German reparations.

Answer: Overproduction, unequal incomes, speculation and weak banks and debts.

Example 4: Germany · 4 marks · Long answerHarder board level

Explain how the Depression helped the rise of the Nazis in Germany, using figures.

Try it first, then show the solutionSolution
  1. US loans stopped; industrial output fell to about 40 per cent of 1929.
  2. About 6 million were unemployed.
  3. Bruning's emergency decrees weakened democracy.
  4. The Nazi vote rose from 2.6 per cent in 1928 to over 37 per cent in July 1932; Hitler became Chancellor in January 1933.

Answer: Collapse of output and 6 million jobless pushed voters to the Nazis, rising from 2.6 to over 37 per cent.

Example 5: Japan analysis · 5 marks · Case-basedHOTS / competency

Case: A Japanese village depends on selling raw silk to the USA; prices collapse, rice falls and debts mount. (a) Name the event causing the silk collapse. (b) State two political effects in Japan. (c) Name the territory seized in 1931.

Try it first, then show the solutionSolution
  1. (a) The Wall Street Crash and the Depression.
  2. (b) Loss of faith in party government and zaibatsu; rise of army influence and nationalist violence.
  3. (c) Manchuria.

Answer: (a) The Crash (b) distrust of parties; army influence (c) Manchuria.

Where students lose marks in Causes of the Wall Street Crash and Impact on the USA, Germany and Japan

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

  • Mistake: Dating the Crash to 1930

    Year errors.

    Do this: The Crash began in October 1929.

    Usually costs: 1 mark.

  • Mistake: Quoting figures loosely

    Unemployment or Nazi vote misstated.

    Do this: Use the figures as printed: 13 million; 2.6 to over 37 per cent.

    Usually costs: 1 to 2 marks.

  • Mistake: Skipping the link to Germany and Japan

    Only USA is described.

    Do this: Link to Nazi rise and Japanese militarism.

    Usually costs: 2 marks.

Exam tips

  • Quote figures exactly as printed.
  • Order causes as in the 1920s sequence.
  • Link to the next chapters in one sentence.
  • Use the three countries as headings.

Practice questions on Causes of the Wall Street Crash and Impact on the USA, Germany and Japan

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 · MCQBoard level

    The Dawes Plan of 1924 was concerned with:
    (a) German reparations and American loans
    (b) Japanese silk
    (c) US tariffs
    (d) the Soviet economy

    Hint

    Loans.

    Answer

    (a) German reparations and American loans.

  2. Q2 · 2 marks · Short answerHarder board level

    Industrial output in Germany fell to 40 per cent of 1929. Find the percentage fall and the output index if 1929 was 100.

    Hint

    100 - 40.

    Answer

    Fall = 60 per cent; the index in 1932 was 40.

  3. Q3 · 3 marks · Short answerHarder board level

    Estimate the number of workers in the USA if 13 million unemployed were a quarter of the workforce, and the number employed.

    Hint

    13 x 4; subtract.

    Answer

    Workforce = 13 x 4 = 52 million; employed = 52 - 13 = 39 million.

  4. Q4 · 4 marks · Long answerHarder board level

    Describe the social effects of the Depression in the USA.

    Hint

    Breadlines, Hoovervilles.

    Answer

    Hunger, breadlines and soup kitchens; shanty towns called Hoovervilles; migration for work; farm foreclosures and the Dust Bowl.

  5. Q5 · 4 marks · Case-basedHOTS / competency

    Case: The Hawley-Smoot Tariff (1930) was passed while US banks recalled foreign loans. (a) Name the two effects abroad. (b) Name the global result. (c) Name the 1931 and 1932 steps on German reparations.

    Hint

    Tariffs and loans.

    Answer

    (a) Fewer imports into the USA and loss of dollar loans abroad. (b) The Depression spread worldwide. (c) The Hoover Moratorium (1931) and the Lausanne settlement (1932).

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.Black Tuesday?Show answer

    29 October 1929.

  2. 2.US jobless at lowest?Show answer

    About 13 million.

  3. 3.Nazi vote July 1932?Show answer

    Over 37 per cent.

  4. 4.Japan's seized territory?Show answer

    Manchuria, 1931.

  5. 5.Dawes Plan year?Show answer

    1924.

Causes of the Wall Street Crash and Impact on the USA, Germany and Japan: frequently asked questions

Why Germany so hit?

It depended on American loans.

What is laissez-faire?

Government leaving the economy alone.

Who beat Hoover in 1932?

Franklin D. Roosevelt.