Question

Why were bank failures common during the Depression? Many people could not pay what they owed to banks. Many people took out new loans. Many people put more money into the banking system. Many people stopped spending money.

Answer 1

The correct answer is Many people could not pay what they owed to banks.

During the 1920's, banks allowed citizens to take out significant loans in order to buy consumer goods and stocks. This risky investment strategy failed at the end of the 1920's, culminating in the beginning of the Great Depression. One of the biggest causes of this economic depression was the Stock Market Crash of 1929. This resulted in thousands of people losing their life savings in stocks. The significant drop in stock prices resulted in citizens having very little actual cash to give back to banks. Instead, they had stocks that were essentially worthless. This is why banks struggled and utlimately thousands failed during the 1930's.

Answer 2

Many people stopped spending money