Question

Pretest: Unit 2

Question 11 of 20
Which financial practice most likely contributed to the Great Depression?
A. Banks began paying interest to depositors who committed to
leaving their money with the banks.
B. Banks lent money for investments and invested in the stock
market using their depositors' money.
C. Banks began using underwriters to help them make decisions
about lending money.
D. Banks lent money for goods and invested their profits in
businesses and corporations.

Answer 1

The financial practice that contributed to the Great Depression was banks lending money for investments and investing in the stock market using their depositors' money.

Step-by-step explanation:

The financial practice that most likely contributed to the Great Depression was B. Banks lent money for investments and invested in the stock market using their depositors' money. This practice, known as speculation, led to unchecked growth in the stock market, which eventually crashed in 1929, causing widespread economic collapse.

As banks lent money for investments, they were increasingly exposed to the risks associated with the stock market. When the stock market crashed, depositors lost their savings, leading to bank failures and a collapse of the banking system.

This financial practice was a major factor in the Great Depression, as it contributed to excessive borrowing and investment in the stock market, creating an unsustainable bubble that eventually burst, leading to a severe economic downturn.

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