Question

A problem for people who bought stock on credit during the 1920s was that if the stock market collapsed, they would owe more than they could repay. would have to buy more stock on speculation. would have to buy more stock on margin. would lose a little money in their stock.

Answer 1

The correct answer is A) they would own more than they could repay.

A problem for people who bought stock on credit during the 1920s was that if the stock market collapsed, they would own more than they could repay.

And then, it happened. On October 24, 1929, the stock market crashed originating one of the most economically devastating events in the economy of the United States, called the Great Depression. Stocks were overpriced and the crash was imminent. And it did happen. Many people lost their jobs, many fabrics and business closed and most of the Banks declared bankruptcy. What was also disastrous was that many people had bought stock on credit. So the problem for them was that they owned more than they could repay.

Answer 2

The correct answer is A) the stock market collapsed, they would owe more than they could repay.

During the 1920s, many American citizens bought stocks on credit. Buying on credit allowed citizens to put 10% of their own money down on a stock and they would borrow the other 90% of the cost of the stock from the bank. This purchasing method caused significant economic problems in America. When the stock market crashed in 1929, thousands of Americans lost a significant amount of money on their stocks. As the stock prices plummetted they could not afford to pay back their loans to the banks. This lead to thousands of bank closures in the United States during the 1930s.