Question

what happened when interest rates rose in 1929?
people stopped taking out loans from banks.
people stopped depositing money in banks.
people stopped buying expensive products.
people stopped buying stocks on margin.

Explanation:

Buying stocks on margin involves borrowing money (usually from a broker) to buy stocks. When interest rates rose in 1929, the cost of borrowing to buy stocks on margin increased. This made it less attractive or more expensive, so people stopped buying stocks on margin. Let's analyze the other options:

• Option 1: A rise in interest rates affects the cost of borrowing for loans, but the direct link to stopping all bank loans is not as specific to the 1929 context as margin buying.
• Option 2: Interest rates on deposits and the decision to stop depositing are not directly related in the same way; deposit rates and loan rates have different dynamics, and this isn't the key event of 1929.
• Option 3: Stopping buying expensive products is too general and not the primary impact of rising interest rates in the 1929 stock market context.

Answer:

D. People stopped buying stocks on margin.