Question

1. what business practice became popular in the 1920s and ultimately contributed to the crash of the stock market?

• selling stocks to employees in their firms
• buying stocks in any liquid companies
• paying any cash for stock purchases
• buying stocks with only a down payment

Explanation:

To determine the practice that contributed to the 1929 stock market crash, we analyze each option:

• "Shorting stocks (borrowing to sell them later)": While shorting exists, it wasn't the primary cause of the 1929 crash.
• "Buying stocks on any liquid investments": This is not a clear or accurate description of a crash - inducing practice.
• "Paying tiny cash for stock purchases": This is not the key practice.
• "Buying stocks with only a down payment (margin buying)": Margin buying was widespread in the 1920s. Investors bought stocks with a small down payment (margin) and borrowed the rest. When stock prices fell, margin calls were issued, forcing investors to sell, leading to a downward spiral and the crash. This practice significantly contributed to the market's instability and the crash.

Answer:

The option "Buying stocks with only a down payment" (the fourth option in the list) is the correct one as margin buying (buying stocks with a small down payment and borrowing the rest) was a major practice that contributed to the 1929 stock market crash.