A Level History - America - Practice Exam

What was one result of easy credit policies in the 1920s?

1. A decrease in consumer spending

2. A rise in household savings

3. A culture of debt and speculation

4. A stagnation of the housing market

The correct answer is: A culture of debt and speculation

The proliferation of easy credit policies in the 1920s contributed significantly to a culture of debt and speculation among consumers and investors. As banks began to offer loans with fewer restrictions and more favorable terms, individuals and businesses felt empowered to borrow easily, leading to increased purchasing behaviors. This resulted in a surge of consumer goods sales and an exuberance in stock market investments, where many engaged in speculative practices, buying stocks on margin with the expectation of rising prices. The accessibility of credit encouraged a mindset where financial liabilities were not seen as burdens but rather as tools for achieving economic prosperity. This culture ultimately sowed the seeds for the financial practices that contributed to the stock market crash of 1929 and the subsequent Great Depression. The rampant speculation, fueled by easy access to credit, illustrates how these policies shaped economic behavior in a way that prioritized short-term gains over long-term sustainability.