Causes of the Great Depression Review

How was European war debt a cause of the Great Depression in America?

• Europe struggled to pay back the money they owed

• International trade decreased between countries

• Europe wanted to focus on spending money on European companies after the war

• International trade decreased and U.S. companies lost money

What is consumer spending?

• The money that customers spend to buy things

• The money that a business makes

• The money that it costs to buy something

Why was consumer spending down by the end of the 1920s?

• Rising product prices

• Wages were flat (people were not being paid higher wages)

• Overbuying on credit (relying too much on a credit card, borrowed more than they could afford)

• All of the above

What is overproduction?

• A company pays their workers too much money

• Businesses producing more goods than Americans could buy

• A company hires too many workers

• Business does not produce enough products for the demand

Why is overproduction a long term cause of the Depression?

• American companies did not have enough products to meet demand

• Customers could not afford to buy new products

• Businesses spent money on products they could not sell, they lost money and closed

• Consumers were spending more and buying more

Why is income inequality (rich becoming richer, poor becoming poorer) a bad thing for the economy?

• Not enough middle class Americans to buy products and keep companies in business

• Wealthier Americans can buy all of the products, solving overproduction

• Too many Americans were weatlhy

• Too many Americans were out of work

Why is it risky to buy stocks on margin?

• People were hoping to make quick money on the market

• If the market goes down, you lose your original investment and you owe money to the bank

• Banks use the stock market to make money

• The stock market always goes up

True or False: Prices started to drop as frightened investors who bought stocks on margin rushed to sell their stocks in order to pay off their loans

• True

• False

After Black Tuesday, people who had bought on margin were stuck with huge ____________.

• Taxes

• Bank notes

• Debts

What did banks experience in the late 1920s / early 1930s?

• Banks had invested in the stock market and lost money

• Panicked investors withdrew money from banks and causes a bank run

• Banks ran out of money after bank runs and shut their doors

• All of the above