THE ROARING 20S 1920 1929
AMERICAN POLITICS IN THE 1920S
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Banks eventually ran out of money to loan, and people’s life savings were gone.
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Banks made loans throughout the Great Depression, helping people pays bills until they could find work.
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Banks were able to people’s deposits safe, but they could not loan out any more money.
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Banks were not at all involved in the Great Depression because people did not use them.
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Detailed explanation-1: -Banks Extended Too Much Credit New businesses-making new products like automobiles, radios and refrigerators-borrowed to support non-stop expansion in output. They kept borrowing and spending even as business inventories soared (300 percent between 1928 and 1929 alone) and Americans’ wages stagnated.
Detailed explanation-2: -The Depression Many of the small banks had lent large portions of their assets for stock market speculation and were virtually put out of business overnight when the market crashed. In all, 9, 000 banks failed–taking with them $7 billion in depositors’ assets.
Detailed explanation-3: -As a bank run progresses, it may become a self-fulfilling prophecy: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy.
Detailed explanation-4: -As stocks continued to fall during the early 1930s, businesses failed, and unemployment rose dramatically. By 1932, one of every four workers was unemployed. Banks failed and life savings were lost, leaving many Americans destitute. With no job and no savings, thousands of Americans lost their homes.