Question

Choose only the CORRECT statements that describe the causes of the Great Depression.

Answer 1

The last choice, Buying on margin

Answer 2

The correct answer is H.

During the 1920s the U.S. stock market underwent a historic expansion. Stock prices rose incredible and thus, people considered them as an easy way to make money. Many of these shares were bought "on margin", meaning that they were bought using leverage and borrowing the balance from a bank or broker. This was considered to be "risk free".

Once prices began to drop, many liquidated their holdings, exacerbating the decline and leading to a 33% drop on stock prices. Due to this, consumer spending shrunk drastically, which lead to reduced industrial output and job losses, which reduced spending and investment even more.