The stock market crashed in 1929 because investors had put too much capital into the stocks by borrowing large amounts of money that they did not truly have.
Answer: Investors bought stocks on credit because they thought prices would continue rising.
Explanation:
There was much speculative buying on the stock market in "the Roaring '20s," as the decade was known. In the 1920s, people were so eager to invest and earn profits through the stock market that they bought stocks "on margin." In other words, they paid for only a marginal percentage of the stocks with their own funds, and borrowed bank funds for the rest of the purchase. By the late 1920s, 90% of the purchase price of stocks was being made with borrowed money. This inflated the market in a way that spiraled out of control, and in 1929 the market crashed.
