Chapter 18.1 Quiz

What led to a bull stock market in 1928?

• economic prosperity and optimism

• the final repayment of Europe's war debt

• Herbert Hoover's election

• Calvin Coolidge's decision not to run for reelection

What was one of the results of the soaring stock market of 1928?

• There was a decrease in the amount of consumer debt carried by the average American.

• More and more new and often inexperienced investors were entering the market.

• The United States was able to pay off the national debt.

• Tax rates were further slashed because of the surplus in government funds.

What did it mean to purchase stocks on "margin"?

• The investor would purchase only the cheapest stocks in the hopes that they would rise slowly over time.

• The stockbroker would take an investor's money and invest in the stocks the broker thought were best.

• The investor would pay a small down payment, and the broker would lend the money for the rest of the purchase.

• The investor would purchase a stock and then sell it in the same day if it rose at all in order to turn a quick profit.

Why were investors in a hurry to sell any stock that dropped slightly in price?

• because the broker could issue a margin call and demand repayment of their loan

• because investors didn't understand the need to invest in quality over time

• because brokers never fully explained the process of buying on margin to investors

• because most Americans viewed the stock market as a vehicle to provide for retirement

What was one way in which speculation contributed to the stock market crash of 1929?

• Brokers who held the loans on margin purchases began to demand repayment.

• Investors continued to flood the market, and companies sold off too many shares.

• The stock market dropped because too many people were buying stocks.

• People continued to purchase on margin, driving up the price of stock artificially

What was the result of the margin calls from brokers on October 21, 1929?

• Many investors held on to their stocks in the hopes that the market would rise again.

• Brokers began to extend more credit to people in order to prop up the market.

• A panic ensued and people began to sell their stocks, causing prices to dive.

• Investors began to purchase more on margin calls in the hope of driving up prices.

Banks failed in 1929 and 1930 as a result of the market crash because _______.

• investors defaulted on loans for stocks, and banks had also invested in the market

• the government, fearing widespread panic, shut down as many banks as possible

• people began to keep their cash in their houses and refused to use a bank

• banks employed most of the brokers who had sold stock on margin

When too many people attempt to withdraw their money from a bank in fear that the bank will collapse, it is called a _______.

• withdrawal panic

• bank run

• margin call

• investment ladder

Which of the following was a root cause of the Great Depression?

• prohibiting the sale of alcohol

• woman suffrage

• uneven distribution of income

• the end of federal control of banks

Why did the U.S. experience a decline in exports just as the market collapsed?

• Companies that were hurt by the stock market crash could not keep up with foreign demand.

• Foreign countries were experiencing prosperity but did not want American products.

• The Hawley-Smoot Tariff discouraged foreign companies from purchasing American goods.

• President Hoover was too late in dropping tariffs in order to increase international trade.