GCSE-readyThe Wall Street Crash and Hoover's response, 1929 to 1933
In October 1929 the American boom ended in a few terrible days on the stock market. This lesson explains why the Crash happened, why it turned into a depression, and why Hoover got the blame.
Why the Crash happened
Buying on the margin: many paid only a small part of the price and borrowed the rest, expecting rising prices to cover the loan.
Weaknesses in the economy: overproduction of goods and food, wealth held by a small minority, and many small, weak banks.
When confidence cracked, everyone tried to sell at once. Prices collapsed on Black Thursday (24 October 1929) and Black Tuesday (29 October 1929).
From crash to depression
With less money to spend, demand fell, factories cut production and workers were laid off.
By 1933 about a quarter of the workforce was unemployed. Farm prices collapsed, and the Dust Bowl drought drove many farmers from the Plains.
Homeless families lived in shanty towns nicknamed 'Hoovervilles'.
Hoover's response
The Hawley-Smoot Tariff (1930) raised import duties, but other countries retaliated, so US exports fell.
The Reconstruction Finance Corporation (1932) lent money to banks and businesses, but critics said it helped the rich, not the hungry.
In July 1932 the Bonus Army of unemployed veterans was driven out of Washington by troops. Hoover lost the 1932 election to Franklin D. Roosevelt by a landslide.
Explain why the Wall Street Crash led to a depression.
- Shareholders who had bought on the margin could not repay their loans, so banks failed and savers lost their money.
- People and businesses stopped spending, so demand for goods fell.
- Factories cut output and laid off workers, which cut demand further: a downward spiral.
Answer: Bank failures wiped out savings, spending fell, and factories cut jobs, so falling demand and rising unemployment fed each other.
Causes of the Crash: speculation, buying on the margin, overproduction, unequal wealth, weak banks. Black Thursday (24 October) and Black Tuesday (29 October 1929). Banks failed; unemployment reached about a quarter by 1933; Hoovervilles; Dust Bowl. Hoover: rugged individualism, Hawley-Smoot Tariff (1930), Reconstruction Finance Corporation (1932), Bonus Army (July 1932). Lost to Roosevelt in 1932.
- Hoovervilles
- Shanty towns of homeless and unemployed people in the Depression, mockingly named after President Hoover.
- Reconstruction
- The rebuilding of the southern USA and the attempt to give rights to freed people after the Civil War, 1865 to 1877.
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What happened when prices fell for people who had bought on the margin?
- Brokers demanded repayment, forcing them to sell
- They made huge profits
- The government paid their debts
- Nothing
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Answer: Brokers demanded repayment, forcing them to sell
Forced selling drove prices down further.
What is a 'bull market'?
- A period of falling prices
- A cattle market
- A bank closure
- A period of rising share prices
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Answer: A period of rising share prices
The 1920s saw a great bull market.
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- Pearson Edexcel International GCSE History (4HI1) specification, topic Paper 2, Investigation A3: Key topic 3
- Britannica: United States, the Great Depression
- Britannica: Stock market crash of 1929
Checked by the GCSE-ready editorial team, 17 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.