THE GREAT DEPRESSION 1929 1940
THE GREAT DEPRESSION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Lack of faith in the stock market
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“get-rich-quick” attitude
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Demand for safe, secure investments
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Moral virtue
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Detailed explanation-1: -When someone did not have the money to pay the full price of stocks, they could buy stocks “on margin.” Buying stocks on margin means that the buyer would put down some of his own money, but the rest he would borrow from a broker.
Detailed explanation-2: -How did the practice of buying on margin and speculation cause the stock market to rise? Speculation drove up market prices beyond the stocks value. Why did the stock market crash cause banks to fail? Banks had lent money to stock speculators and had invested depositor’s money in stocks.
Detailed explanation-3: -During the Red Scare of 1919-1920, many in the United States feared recent immigrants and dissidents, particularly those who embraced communist, socialist, or anarchist ideology.
Detailed explanation-4: -How did buying stocks on margin contribute to the stock market crash? As stock sales made prices fall, brokers demanded loan repayments from investors who had bought on margin, which forced them to sell their stock, setting off further decline.