Question

How did the overextension of credit lead to the Great Depression?

O Extending credit to consumers allowed for the sale of more goods, eliminating the gap between the rich and the poor.
O Increasing the availability of credit kept interest rates high, sustaining and strengthening the economy.
O Credit expansion created the illusion of wealth, encouraging consumers to buy more and accumulate more debt than they could repay.
!!!
O Greater accessibility of credit led banks to protect their cash reserves, preventing bank failures.

Answer 1

The overextension of credit led to the Great Depression as it created an illusion of wealth and encouraged excessive borrowing and spending that eventually led to an economic collapse.

Step-by-step explanation:

The overextension of credit played a major role in leading to the Great Depression. Credit expansion created the illusion of wealth and encouraged consumers to buy more and accumulate more debt than they could repay. This excessive borrowing and spending eventually led to a collapse in the economy as people defaulted on their loans and banks faced severe financial strain.

Learn more about Impact of overextension of credit on the Great Depression