Answer:
<u>Caused Stock Market Crash</u>
- Increased buying of stocks on credit
- Income-tax cuts pumping money into the market
- Marked decline in construction industry
In the 1920s U.S. stock prices were rising at an unsustainable rate so much so that a lot of people wanted to benefit from the stock market. They pumped everything they had inside including the income tax cuts by the government. They even used credit/ loans to buy stocks.
In 1928, the Fed was worried about how overheated the economy was and raised interest rates which hurt the construction industry which relied heavily on loans.
These factors led people to become desperate such that when the market declined even a little bit, people began to sell in large quantities so as to make back their investments and so the stock market crashed.
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<u>Result of the Crash.</u>
- Fallout from the "court-packing" scheme
- Roosevelt's implementation of the principles of Keynesian economics
After the Crash, Roosevelt came to power and began to implement Keynesian economic principles which called for government intervention to save a failing economy as opposed to waiting for it to correct itself. When the Supreme Court kept threatening to impede his programs, Roosevelt tried to engage in Court-Packing which would involve increasing the number of Supreme Court Justices.
