Question

WILL MARK BRAINLIEST!!

Answer 1

Answer:

In the 1920s more people invested in the stock market than ever before. Stock prices rose so fast that at the end of the decade, some people became rich overnight by buying and selling stocks. People could buy stocks on margin which was like installment buying. People could buy stocks for only a 10% down payment! The buyer would hold the stock until the price rose and then sell it for a profit. As long as the stock prices kept going up, the system worked. However, during 1928 and 1929, the prices of many stocks went up faster than the value of the companies the stocks represented. Some experts warned that the bull market would end.

Buying on credit was a huge problem in the 1920s. Since the 20s was a period of great economic boom, not many people took the future into consideration. Many people bought refrigerators, cars, etc. with money that they did not have. This system was called installment buying. With this system, people could make a monthly, weekly, or yearly payment on an item that they wanted or needed. This happened until Black Tuesday, when the stock market crashed. The two systems, installment buying and buying on credit, left millions of people in debt . When many lost their jobs, they could not pay back the debts they had incurred.

Answer 2

Buying stock on margin is when you buy it without paying the full price. A individual who buys on margin pays a small percentage of the stock's price and borrows the rest of the money. The individual hopes that the stock price will rise, helping them to pay off the loan.

People were able to pay inflated rates for stocks because they were buying on the margin and were overconfident about the stocks' prospects. The bubble finally burst, and stock prices plummeted. As stock prices plummeted, anyone who had borrowed to buy on margin was in deep trouble. They went bankrupt after they were unable to repay their loans. Banks struggled as a result of the failure of too many people to repay their loans. Much of this led to the Great Depression.