THE ROARING 20S 1920 1929
AMERICAN ORGANIZED CRIME OF THE 1920S
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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had to print new money.
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had invested in European banks.
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could not return depositors’ money.
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charged too high an interest rate.
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Detailed explanation-1: -Although only a small percentage of Americans had invested in the stock market, the crash affected everyone. Banks lost millions and, in response, foreclosed on business and personal loans, which in turn pressured customers to pay back their loans, whether or not they had the cash.
Detailed explanation-2: -Deflation increased the real burden of debt and left many firms and households with too little income to repay their loans. Bankruptcies and defaults increased, which caused thousands of banks to fail. In each year from 1930 to 1933, more than 1, 000 U.S. banks closed.
Detailed explanation-3: -The failures of these institutions triggered a correspondent cascade that forced scores of commercial banks to suspend operations. In communities where these banks closed, depositors panicked and withdrew funds en masse from other banks. Panic spread from town to town.
Detailed explanation-4: -Banks Extended Too Much Credit They kept borrowing and spending even as business inventories soared (300 percent between 1928 and 1929 alone) and Americans’ wages stagnated. The banks, ignoring the warnings signs, kept subsidizing them.