Judging from the events of the late 1920s and early 1930s, how important do you think public confidence is to the health of the economy? Explain. Think About:
• what happened when overconfidence in the stock market led people to speculate and buy on margin
• how confidence affects consumer borrowing
Public confidence is unhealthy to the economy. This is beacuse in the 1920s and the 1930s people became to confidant in the system and when the stock market crashed, it ended up in the great depression. People were too overconfidante in the stock market and put large amounts of money in it, and when they made a profit, didnt sell because they wanted more money, and thought they would get it because the economy was constantly going up. People started to buy on margin in stocks, which ment that they could by a stock for a certain price and pay the rest later. When the stock market crashed many people did not have the money to pay it back. People also started to depend on credit to buy things. Americans brought mostly everything on credit, some which they could not afford, and when the depression hit they had no way on order to pay these debts.
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