Lesson: The Stock Market Crash

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Lesson Objective

The students will understand the causes of the stock market crash and how the crash helped lead to the great depression.

Lesson Plan

Lesson Topic:  The Stock Market Crash of 1929

Learning Objectives:  What should students be able to do at the end of this lesson?

The students will understand the causes of the stock market crash and how the crash helped lead to the great depression.

Standards:

SS 5.1         Analyze why the United States economy weakened during the 1920s.

SS 5.2         Identify the events that led to the stock market crash of 1929.

SS 5.3         Identify the causes of the Great Depression.

 

Materials Needed:

  • Supply and demand activity page
  • Flipchart
  • Pencils, no homework passes, etc (something your students will want)
  • Student money (I use counters)

Level of Bloom’s Taxonomy:

  1. Analyze – investigating through supply and demand and investigating a stock for homework.

Background information: what do I need to know to teach this lesson?

What made the stock market crash? Here's a brief summary.

Capital is the tools needed to produce things of value out of raw materials. Buildings and machines are common examples of capital. A factory is a building with machines for making valued goods. Throughout the twentieth century, most of the capital in the United States was represented by stocks. A corporation owned capital. Ownership of the corporation in turn took the form of shares of stock. Each share of stock represented a proportionate share of the corporation. The stocks were bought and sold on stock exchanges, of which the most important was the New York Stock Exchange located on Wall Street in Manhattan. 

Throughout the 1920s a long boom took stock prices to peaks never before seen. From 1920 to 1929 stocks more than quadrupled in value. Many investors became convinced that stocks were a sure thing and borrowed heavily to invest more money in the market. 

But in 1929, the bubble burst and stocks started down an even more precipitous cliff. In 1932 and 1933, they hit bottom, down about 80% from their highs in the late 1920s. This had sharp effects on the economy. Demand for goods declined because people felt poor because of their losses in the stock market. New investment could not be financed through the sale of stock, because no one would buy the new stock. 

But perhaps the most important effect was chaos in the banking system as banks tried to collect on loans made to stockmarket investors whose holdings were now worth little or nothing at all. Worse, many banks had themselves invested depositors' money in the stockmarket. When word spread that banks' assets contained huge uncollectable loans and almost worthless stock certificates, depositors rushed to withdraw their savings. Unable to raise fresh funds from the Federal Reserve System, banks began failing by the hundreds in 1932 and 1933. 

By the inauguration of Franklin D. Roosevelt as president in March 1933, the banking system of the United States had largely ceased to function. Depositors had seen $140 billion disappear when their banks failed. Businesses could not get credit for inventory. Checks could not be used for payments because no one knew which checks were worthless and which were sound. 

Roosevelt closed all the banks in the United States for three days - a "bank holiday." Some banks were then cautiously re-opened with strict limits on withdrawals. Eventually, confidence returned to the system and banks were able to perform their economic function again. To prevent similar disasters, the federal government set up the Federal Deposit Insurance Corporation, which eliminated the rationale for bank "runs" - to get one's money before the bank "runs out." Backed by the FDIC, the bank could fail and go out of business, but then the government would reimburse depositors. Another crucial mechanism insulated commercial banks from stock market panics by banning banks from investing depositors' money in stocks.

Taken from: http://www.pbs.org/fmc/timeline/estockmktcrash.htm

Instructional Procedures:  How will I…?

…recall prior relevant information?  Make connections to prior learning?

  1. Ask the students to recall the stock market activity we played the day before.
  2. Ask the students what they remembered about the game – trying to have them recall that they made a lot of money in the beginning and even borrowed money that they didn’t have from the bank in order to invest more money in the rising stock market.  Remind the students that when the market crashed some of the student owed the bank money, because they had borrowed to invest.
  3. Remind the students that they stock market game they played is a miniature version of what happened in the US in the 20’s.

….present new material?

  1. Show Youtube video to start the lesson.  The video will document the 20’s and ends with the stock market crash. http://www.youtube.com/watch?v=SclJ94h2oyQ
  2. Present the flipchart (have added the videos to the flipchart already) to the students, that details the causes of the great depression.  There is a link in the flipchart that that will take you to the NYSE.  Once on the stock exchanges website show the students the stock ticker, so they can get an idea of what a ticker is.  Watch the following video http://www.youtube.com/watch?v=RJpLMvgUXe8.
  3.  The second page of the flipchart introduces the supply and demand activity.  Read through the activity completely before attempting in your classroom.  I have found that this activity works best with no homework passes.  It is very important to not let on that you have more passes, demonstrating the fact that 1 of anything is worth more, than multiple.
    1. After the supply and demand activity it is important to discuss with the students what happened during the activity.  I relate this to ipod’s and ipad’s.  I ask the students to think about when a new ipod comes out – what happens to the price.  Then we talk about what happens when a new generation comes out – the previous generation ipod drops in price.
    2.  After students understand the concept of supply and demand, then I relate this to why the US government can’t just print more money – which is how all the students think the gov’t should get us out of the great depression.  We talk about how the money in the US used to be backed by gold, but now it is backed by the “full faith and TAXING ability” of the US government.  We have a full conversation about what happens when more money is printed – it isn’t worth as much and then we have inflation.
    3.  After finishing the activity, go back and finish the flipchart.  This is a fairly short lesson that is really meant to set the stage for continuing on into the great depression.

 

 

…assess performance????

  • Performance will be assessed by classroom discussion.   This is a highly interactive lesson and all participants should be participating in the discussions and activities.

…Enhance retention? (homework)

  • For this lesson’s homework the students will be asked to pick a stock from the stock market and track the stock’s closing price for the remainder of the unit.  At the end of the unit we will plot the stock’s price change for the period using Excel.  The students will learn how to make a graph based on the information (we will make a line graph to show the change over time).

 

Test Questions from today’s objectives?

Checklist:

Did Students…?

   ….know my objectives?

  ….actively engage with the new material?

   …work together on a task?

   …get feedback on their performance?

 

What went well and needed improving:

This entire lesson went really well and there isn’t really anything that I would change.  I did add a few youtube video’s to this lesson plan and I think that will give the student’s a real sense of the time period and the tragedy that they can’t really comprehend of the stock market crash.  The supply and demand activity is one of the best activities I do with my student’s.  They truly get into the activity and understand supply and demand in a very real and concrete way.

 

Lesson Resources

supply and demand activity.docx  
2,690
New York Stock Exchange
6710
1920's Youtube video
6710
stockmarketcrash.flipchart  
1,700
The Great depression lesson 2.docx  
1,142

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