116k views
2 votes
How did this trend contribute to the great depression?

1) by leading to a rise in consumer demand
2) by discouraging stock market speculation
3) by stabilizing unemployment and inflation rates
4) by causing drops in profits and employment

User HBrent
by
8.0k points

1 Answer

6 votes

Final answer:

The trend of rising consumer demand, as well as excessive stock market speculation and credit buying, destabilized the economy and played a role in leading to the Great Depression. An uneven distribution of wealth and inflated stock prices without underlying value only worsened the situation, resulting in economic decline when the market crashed.

Step-by-step explanation:

The trend that contributed to the onset of the Great Depression was marked by a rise in consumer demand, which ultimately led to disastrous economic outcomes. The buying of consumer items on credit meant that during the Depression, households prioritizing basic necessities defaulted on credit payments, severely impacting retail stores and leading to mass layoffs. Excessive stock market speculation fueled by margin buying and insider trading created an unsustainable bubble, with stock prices inflated beyond the actual value of companies. Additionally, the uneven distribution of wealth meant that the vast majority of families had no savings when the Depression hit, exacerbating the economic distress. All of these factors, combined with declines in international economies and poor corporate profits, spiraled into the financial crisis known as the Great Depression.

User Reedcourty
by
7.3k points