INTER WAR YEARS 1919 TO 1939
THE GREAT DEPRESSION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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excessive government regulation of banks.
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the federal government’s ownership of banks.
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an excessive amount of currency in circulation.
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the lack of protection for funds deposited by individuals in banks.
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Detailed explanation-1: -Therefore, an obvious defect in the United States’ banking system that was exposed during the Great Depression was the lack of protection for funds deposited by individuals in banks. The correct answer is D. Many people lost their money because banks didn’t protect it.
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: -Analysis of new data from the early 1930s suggests that depositors’ fears led to runs on banks that were clustered in time and space. These panics significantly reduced lending and monetary aggregates.
Detailed explanation-4: -People rushing to withdraw their money from banks caused many bank failures in the United States and elsewhere in 1930–33, decreasing the amount of money available for loans. Also, people who had taken out loans were unable to pay back the banks.
Detailed explanation-5: -The Federal Reserve failed to prevent the collapse of the banking system. High tariffs strangled international trade.