Question

How did buying stocks on credit contribute to the Great Depression?

The government stepped in and stopped stock purchases so that people could not buy more.


Banks wanted to lend people money, but people were hesitant to borrow.


Credit interest rates were too high for people to pay.


When stock prices fell, people did not have the money to cover their losses.

Answer 1

Buying stocks on credit contributed to the Great Depression by causing widespread defaults and financial ruin when stock prices fell and people couldn't cover their losses.

Step-by-step explanation:

The Great Depression, spanning from 1929 to the late 1930s, was a severe worldwide economic downturn. Triggered by the 1929 stock market crash, it caused widespread unemployment, poverty, and economic hardship. Governments implemented various policies to address the crisis, marking a transformative period in economic thought and policy.

Buying stocks on credit contributed to the Great Depression in several ways. One major way was that when stock prices fell, people who had bought stocks on credit did not have the money to cover their losses. This led to widespread defaults and financial ruin for many individuals and businesses. Additionally, the excessive use of margin to buy stocks created a Wall Street stock market bubble, which burst when credit became tighter and people received margin calls, leading to a crash in stock prices.