US Economy Weaknesses and Wall Street Crash

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Questions and Answers

What was the main consequence of banks ceasing to buy shares on October 28th?

Stabilization of share prices

Increase in investor confidence

Panic selling intensified (correct)

Record low trading volumes

What notable event occurred on Black Tuesday, October 29th?

Heavy buying activity by investors

Price stabilization following a sell-off

16.4 million shares traded with no buyers (correct)

A government intervention announcement

Which event occurred the day after Black Thursday, October 25th?

Only 3.5 million shares traded

President Hoover's address about the market (correct)

Banks actively buying shares

A significant rise in stock prices

How many shares were traded on the day described as Black Thursday?

13 million shares Signup and view all the answers

What was a reaction to falling share prices on October 23rd?

Speculators were told to pay off bank loans and sell shares Signup and view all the answers

What was the primary reason US companies faced declining profits in the late 1920s?

Saturation of the US market Signup and view all the answers

What does 'Buying on Margin' refer to?

Borrowing most of the share value to purchase stocks Signup and view all the answers

What triggered the panic selling of shares in September 1929?

Economic slowdowns and declining industrial output Signup and view all the answers

How did speculators exacerbate the banking crisis?

By failing to repay bank loans after share prices declined Signup and view all the answers

What action did the six major banks decide to take on 25 October?

They agreed to buy shares to stabilize prices Signup and view all the answers

What was the effect of the panic selling on October 29, 1929?

Share values rapidly decreased due to high volume of sales Signup and view all the answers

Around how many banks closed each year during the 1920s?

500 Signup and view all the answers

What was one reason speculators became increasingly nervous in the late 1920s?

A decrease in construction industry activity Signup and view all the answers

What economic issue contributed significantly to the Wall Street Crash of 1929?

Oversaturation of consumer products Signup and view all the answers

How did the wealth gap affect consumer spending in the 1920s?

It left a large portion of the population unable to purchase goods. Signup and view all the answers

What role did overproduction play in the lead-up to the Wall Street Crash?

It caused a surplus that could not be sold. Signup and view all the answers

Which government policy exacerbated the issues faced by American farmers in the 1920s?

Implementation of tariffs on European goods Signup and view all the answers

What effect did falling company profits have on the workforce?

Layoffs and wage cuts Signup and view all the answers

What technology significantly increased the production capabilities of US industries in the 1920s?

Mass production technology and assembly lines Signup and view all the answers

Which factor created competition for American farmers during the late 1920s?

Cheap imports from Canada Signup and view all the answers

How did tariffs affect the ability of American industries to sell products overseas?

They restricted access to foreign markets. Signup and view all the answers

What was one of the primary reasons for the downturn in the economy at the end of the 1920s?

Decline in car sales Signup and view all the answers

What economic policy did the Republican Party support during the 1920s?

Laissez faire economic policy Signup and view all the answers

How did speculators typically finance their stock purchases in the 1920s?

Paying 10% in cash and borrowing the rest Signup and view all the answers

What happened in October 1929 that triggered a loss of confidence in the stock market?

Speculators started to sell their shares simultaneously Signup and view all the answers

Which issue contributed to the financial instability of small rural banks in the 1920s?

Inadequate cash reserves Signup and view all the answers

What event occurred on October 24, 1929, that marked a significant point in the stock market crash?

Black Thursday Signup and view all the answers

In 1929, how much money did banks lend to speculators?

$9 billion Signup and view all the answers

What was the belief that drove speculation in the stock market during the 1920s?

Share prices would continue to rise Signup and view all the answers

What was a major sign of the economic troubles in 1929 before the Wall Street Crash?

Declining car sales Signup and view all the answers

How did banks contribute to the speculative behavior before the stock market crash?

By offering loans to speculators to buy on margin Signup and view all the answers

What effect did the rush to buy shares in 1928 have on share prices?

Led to a steady increase in prices Signup and view all the answers

What was a significant consequence of speculators failing to pay back their loans?

Bankruptcies of speculators Signup and view all the answers

What was the outcome for depositors if a small rural bank collapsed during the 1920s?

They would likely lose virtually all their savings Signup and view all the answers

What demographic change occurred from 1920 to 1929 regarding stock ownership?

Increased from 4 million to 20 million Signup and view all the answers

What happened to share prices after the Babson Break in September 1929?

They experienced a brief recovery before declining again Signup and view all the answers

What was the approximate number of banks operating in the USA during the 1920s?

30,000 Signup and view all the answers

Study Notes

Underlying Weaknesses of the US Economy (1920s) and the Wall Street Crash

Wealth Gap: In 1925, nearly 42% of the population lived below the poverty line with an annual income of less than $2000. This meant many couldn't afford basic necessities.
Overproduction: Industrial mass production and new management techniques (Taylorism) led to a surplus of goods, creating a saturated market. Sales dropped, thus profits and share prices.
Farmers' Overproduction: Farmers used new technologies (e.g. combine harvesters) to produce more crops. This, combined with tariffs that restricted exports, and competition from other countries, depressed farming profits.
Lack of Export Markets: US industries faced tariffs from other countries, which limited their ability to sell products abroad. This resulted in a saturated domestic market, leading to decreased sales and falling profits, which lead to a decline in share values.

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Description

Explore the underlying weaknesses of the US economy during the 1920s that led to the Wall Street Crash. This quiz covers key topics such as the wealth gap, overproduction, farmers' struggles, and limited export markets. Test your knowledge on how these factors intertwined to create an economic crisis.