A Level History - America - Practice Exam

Which of the following was cited as a reason for the Wall Street Crash of 1929?

1. Increased government regulation

2. Decline in agricultural production

3. Panic selling by investors

4. Stable economic conditions

The correct answer is: Panic selling by investors

The choice indicating that panic selling by investors was a reason for the Wall Street Crash of 1929 highlights a critical psychological aspect of the stock market that contributed to the dramatic downturn. As stock prices began to fall, fear spread among investors, leading many to sell their shares hastily in an attempt to minimize losses. This panic created a vicious cycle, exacerbating the decline in stock prices and resulting in widespread financial ruin for many individuals and businesses alike. Understanding the context surrounding the crash is important. Leading up to 1929, there was a sense of overconfidence in the stock market, characterized by speculation and the belief that prices would continue to rise indefinitely. However, once the market began to decline, that optimism quickly turned to despair, prompting a wave of selling that was driven more by emotion than by economic fundamentals. In contrast, other factors like increased government regulation were not prominent at that time, as there was a general trend toward less regulation in the 1920s. The decline in agricultural production, while significant in its own right, mainly affected rural economies rather than directly driving the stock market crash. Additionally, the notion of stable economic conditions was misleading; the economy was actually facing underlying weaknesses that would later contribute to the Great Depression. Therefore