Matching Pairs 7.2 Lesson Plan ActivityOnline version Matching Stock Market Crash by Catherine LaVoy 1 Banks Invested Deposits in the Stock Market 2 Buying on Margin 3 Bank Runs 4 Overspeculation 5 Bankruptcies 6 Increased Use of Credit 7 Lack of Credit 8 Inexperienced Investors 9 Panic Selling 10 The Great Depression 11 No New Investment A large number of people invested large amounts of their savings in the Stock Market. These amounts were small in comparison to the wealthy, but they were large percentages of their money. Banks took the money that bank users placed in the bank and bought stocks with them Investors assumed the price of stocks could continue to increase. This led the price of stocks to rise above what they were likely worth. When a large number of investors began selling their stocks, it set off a selling frenzy that drove down the price of stocks. Banks call in the loans they gave to people and businesses. When they do not have the money to give, businesses go out of business and many people are left with no money. People race to banks to pull out their money. They find that the bank does not have any money to give them. The money is lost. This leads many banks to close. The Stock Market crash signals the start of this time of economic hardship in the United States. Investors could buy a stock by only paying for a small amount of its total cost and borrowing the rest of the money required to make the full purchase. A lack of credit led to a lack of investment. This made it difficult for new businesses to open and led to a lack of new jobs being created for people. Business was good and banks were interested in making more money, so they offered cheap loans to bank members. Many businesses also offered people the ability to buy things in installments. Due to bank failures, there were very few institutions that could loan people money. This made it difficult to get a loan for anything.
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