Question

How did this trend contribute to the Great Depression?

a. By leading to a rise in consumer demand
b. By discouraging stock market speculation
c. By stabilizing unemployment and inflation rates
d. By causing drops in profits and employment
e. By promoting international trade agreements
f. By encouraging government intervention in the economy

Answer 1

The trend of buying consumer items on credit contributed to the Great Depression by leading to a rise in consumer demand initially, but ultimately causing drops in profits and employment due to defaults on credit payments and underconsumption.

Step-by-step explanation:

One of the key contributing factors to the Great Depression was the overproduction and underconsumption of consumer goods. The trend of buying consumer items on credit led to a rise in consumer demand initially, but when households struggled with job losses during the Depression, they defaulted on their credit payments, leading to a decrease in consumer spending. This resulted in stores laying off workers, causing drops in profits and employment. The unequal distribution of wealth and the inability of the majority of American families to save also contributed to the economic catastrophe.