Which sentence explains how stock market speculation led to the Great Depression? The Federal Reserve attempted to curb the excessive lending by banks by constricting the money supply, making it harder for people to repay debts. The closing of many factories led to the rise in consumer debt when workers lost needed income. Stock profits were in the 1920s leading few Americans to invest in the stock market Stock market investors were buying stock on margin.

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Which sentence explains how stock market speculation led to the Great Depression? The Federal Reserve attempted to curb the excessive lending by banks by constricting the money supply, making it harder for people to repay debts. The closing of many factories led to the rise in consumer debt when workers lost needed income. Stock profits were in the 1920s leading few Americans to invest in the stock market Stock market investors were buying stock on margin.

Answer 1

Stock market investors were buying stock on margin.Buying on margin meant investors were purchasing stocks with borrowed money, often a significant percentage of the purchase price. This inflated the market beyond its real value. When the market began to decline, these margin calls (demands for repayment of the borrowed money) forced investors to sell their stocks, further driving down prices and creating a snowball effect that led to the crash and contributed significantly to the Great Depression.

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