Matching Pairs 7.2 Lesson Plan ActivityOnline version Matching Stock Market Crash by Catherine LaVoy 1 Inexperienced Investors 2 Overspeculation 3 Bank Runs 4 Increased Use of Credit 5 Panic Selling 6 Lack of Credit 7 No New Investment 8 Bankruptcies 9 Buying on Margin 10 The Great Depression 11 Banks Invested Deposits in the Stock Market When a large number of investors began selling their stocks, it set off a selling frenzy that drove down the price of stocks. 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. 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. The Stock Market crash signals the start of this time of economic hardship in the United States. 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. 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. 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. Investors assumed the price of stocks could continue to increase. This led the price of stocks to rise above what they were likely worth. 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. Banks took the money that bank users placed in the bank and bought stocks with them 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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