1920's Questions

1. How does a person make money on an investment?

They make products that people want to buy for more than its worth to make it, therefore making more money faster then just charging a basic price for an item.

2. What makes 'cheap credit' mean?

When the economy is doing well, people believe that it will only get better, so they take out loans from the bank that they can't pay back even though they seem reasonable therefore creating the illusion that the money is nearly free.

3. What is 'buying on margin' mean?

It means to buy stock for 10% of cost to buy stock normally, however this is a bad idea, especially if you don't have a lot of money becausethen if the stocks that you bought lose value they you lose money.

4. How is 'speculation' different from 'investment'?

Speculation is when you don't care about the company, you only want to buy and sell stock quickly. An investment you actually believe in the company and stick with it.

5. How does 'panic selling' start?

It is when everyone wants to sell at the same time and no one wants to buy.

6. How can high unemployment start a negative economic cycle?

Not having a job causes you to not buy stuff from companies therefore causing companies to start making less products and fire people because the are not needed, this cycle keeps happening and is called the "dog chasing tail" effect.

7. How did increases in technology contribute to overproduction in the 1920's?

Technology took away jobs because it made jobs easier, therefore making too many things that nobody could buy.

8. What is meant by 'uneven distribution of wealth? Is it a bad thing?

It means the dividing of money unevenly to people, different classes would get more or less money depending on if they were in the lower, middle, higher classes.

9. What is a tariff, and why don't they seem to work in the modern economy (post-WWI)?

It is a tax that is put on goods from other countries.

10. What is 'rugged individualism? Is it real?

It is when someone tries to be self sustaining and it can work if there is a large number of people doing it as a group, like for example the Amish.

11. What is a Hooverville, and why is it called that?

A Hooverville is a town or city that is poor because it has suffered through a lot of poverty due to a poor economy. For example an industry town that has a paper mill might become a Hooverville due to the fact that that paper mill is where the town gets most of its income for its economy.