In this lesson you will participate in an activity that illustrates falling wages, rising unemployment and falling prices. You will learn about the role of the collapsing U.S. banking system in causing the Great Depression. You will also learn what a banking panic is and how bank failures can lead to bank panics. Finally, you will observe the impact that many events occurring at the same time might have on the economy.

When you have finished this lesson you should be able to:

• Define deflation, bank failure and money supply (stock).
• Explain the relationship between declining prices and business revenue.
• Analyze the relationship among declining business revenue, wages and unemployment.
• Analyze the relationship between bank failures and bank panic.
• Explain the role consumer confidence plays in maintaining a strong financial system.