Question

What investment decisions destabilized the economy during the 1920s?

Answer 1

People made investments based on the bull market instead of considering the value of the stock which led to destabilizing the economy.  

Speculation and buying on margin made people lose a lot of money. In consequence, the stock market and the economy became increasingly unstable. Loans couldn’t be paid back by speculators, and banks couldn’t cover depositors’ withdrawals because they had lost a lot of money in the stock market themselves.

This situation combined with some economic principles such as overproduction (when the good’s supply outpace their demand) made the stock market crash causing the Great Depression, the worst economic downturn in the history of the industrialized world. It lasted ten years, from 1929 to 1939.