Question

which statement best explains how bank failures contributed to the great depression?
the interest rates on bank loans were too high
business could not be done when president franklin roosevelt declared a bank holiday
people lost their savings because the government did not insure bank deposits.
foreign investors did not invest enough in u.s. banks.

Explanation:

To determine the correct answer, we analyze each option:

• Option 1: High interest rates weren't a primary cause of bank failures in the Great Depression; bank runs and lack of deposit insurance were more critical.
• Option 2: The bank holiday (declared by FDR) was a response to bank failures, not a cause. It aimed to stabilize banks.
• Option 3: Before FDIC (Federal Deposit Insurance Corporation), there was no government deposit insurance. When banks failed, people lost their savings, leading to more bank runs and failures. This is a key factor.
• Option 4: Foreign investment in U.S. banks wasn't a main cause of the widespread bank failures during the Great Depression. The domestic banking system's issues (like runs, lack of insurance) were more impactful.

Answer:

C. People lost their savings because the government did not insure bank deposits.