Final answer:
The 1920s stock market rise depended on speculation, the expansion of consumer credit, and investment in new industries. However, this growth was unsustainable, with overvaluation and poor income distribution among Americans leading to a limited pool of new buyers and ultimately the market's collapse.
Step-by-step explanation:
In the 1920s, the continued rise in the stock market and economic growth was largely sustained by a combination of factors including rampant speculation, the expansion of consumer credit, and significant investment in new technologies and industries. However, the growth was precarious and not based on strong economic fundamentals. Speculators often purchased stocks on margin with only a small down payment, banking on the market's continued upward trajectory to make a profit. This speculative bubble was further inflated by an uneven distribution of wealth, where the majority of American families had no savings to invest in the market, leading to a limited pool of new buyers.
Poor income distribution meant that as the speculation ramped up, there were fewer and fewer new investors to sustain the rising stock prices. Moreover, as companies like RCA were selling highly desirable consumer goods such as electric ovens, washing machines, and radios, the projection of future growth fueled the stock values despite many corporations not paying dividends. When it became evident that stock prices were out of alignment with real economic performance, the overvaluation of stocks combined with a tightening of credit led to a market collapse, precipitating the Great Depression.