Question

Describe how the federal government's monetary policies, stock market speculation and

increasing consumer debt might have helped lead to the Great Depression

Answer 1

The Great Depression was caused by a combination of federal government monetary policies, excessive stock market speculation, and rising consumer debt, leading to an unsustainable economic bubble that burst with the 1929 stock market crash.

Step-by-step explanation:

The causes of the Great Depression are complex and involve various factors that interacted to drag the American economy into a deep downturn from 1929 to the onset of World War II. Key components of this economic crisis included federal government monetary policies, rampant stock market speculation, and an increase in consumer debt. Leading up to the Depression, the Federal Reserve's role in managing the economy was more of a hands-off approach. This laissez-faire stance was challenged as the Federal Reserve later began to take a more active role in economic matters to prevent future depressions.

Stock market speculation was rampant during the 1920s, where investors used borrowed money to amplify their investment capacity, creating a market bubble. Insider trading and the exploitation of credit on such a massive scale led to inflated stock prices that did not reflect the actual value of the companies, which ultimately contributed to the stock market crash that signaled the start of the Great Depression. Moreover, the increase in consumer debt, particularly through buying on margin, greatly affected the economy. When the stock market crashed, the excessive consumer debt fueled a cycle of bank loan recalls and defaults that severely contracted the money supply, further exacerbating the economic decline.

These factors were compounded by poor income distribution and international economic problems, which, combined with a decline in public confidence and a variety of missteps by financial and government institutions, precipitated the Great Depression's long and arduous economic stagnation.

Answer 2

The correct answer to this open question is the following.

Indeed, the federal government's monetary policies, stock market speculation, and increasing consumer debt helped lead to the Great Depression.

After the positive economic period known as the "Roaring 1920s," American citizens had bought so many necessary and unnecessary things such as electro domestics, cars, and even houses. Most of the purchases were on credit, generating big debts. This was our consumerism.

Then it came to the speculation on the stock market, and the federal government did nothing to interb¿vene and avoid possible deterioration of the US economy.

And the worst thing happened. After the United States stock market crash of October 29, 1929, millions of citizens lost their jobs, thousands of companies closed, and many banks went into bankruptcy. The Great Depression had just started.