Causes of the Stock Market Crash
-Investors made high-risk purchases, often using low down payments.
-Low interest rates and a high money supply encouraged risky investments.
Effects of the Stock Market Crash
-Banks demanded immediate payment for loans they had given to investors.
-In one year, the stock market lost more than half its value.
Explanation:
The Stock Market Crash of 1929 was preceded by a speculative boom in the mid-1920s, during which millions of Americans invested in stocks. Growing demand for stocks drove up their prices, which attracted more and more new investors who wanted to get rich on investment in stocks. This led to the formation of an economic bubble. At the same time, many investors bought shares on credit, borrowing the necessary funds from banks.
On September 3, 1929, stock prices reached their highest point, and after that the market began to become unstable with both ups and downs, but speculation nevertheless continued. After a brief downturn, the bubble finally burst on October 24, and shares greatly lowered their prices. Due to the crisis, many loans could not be repaid, causing banks to go bankrupt. This resulted in a snowball effect: the deteriorating economy accelerated into depression. The resulting deflation caused trade to collapse, and the world went into a slump.
