Florida US History EOC Practice Exam

Which of the following was a major cause of the Great Depression?

1. Decreased agricultural production

2. Increased government spending

3. Market speculation and stock market crash

4. Higher employment rates

The correct answer is: Market speculation and stock market crash

The major cause of the Great Depression was market speculation and the stock market crash. In the years leading up to the crisis, the stock market experienced rapid growth, driven by rampant speculation where investors purchased stocks based on the expectation that prices would continue to rise rather than on the underlying value of companies. This created an unstable economic environment. When the stock market crashed in October 1929, it shattered the illusion of prosperity and led to a significant loss of wealth among investors and consumers alike. The immediate effects were catastrophic – banks failed, businesses closed, and unemployment surged, ultimately leading to widespread economic hardship. The crash severely undermined public confidence in the economy and diminished consumer spending, which are crucial for economic stability and growth. Other factors, such as decreased agricultural production and high unemployment rates, contributed to the overall economic decline, but the pervasive market speculation and subsequent stock market crash are widely recognized as the pivotal events that triggered the Great Depression. The role of government spending during this period was also limited, as the prevailing economic philosophy emphasized minimal intervention in markets, which further exacerbated the economic downturn.