Although the Collapse of Prices on the New York Stock

question 56

Multiple Choice

Although the collapse of prices on the New York Stock Exchange in October 1929 caused severe problems in the United States,it had immediate and disastrous consequences in Europe because:

• A)European royalty was the primary source of investment capital on Wall Street.
• B)the central banks of all European countries had invested heavily in American companies.
• C)the United States had become a primary international creditor during World War I.
• D)national European exchanges were not large enough to handle the influx of investors.
• E)European stock exchanges listed the same stocks and therefore crashed with New York.

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Definitions:

U.S. Treasury Deposits

Accounts maintained by the U.S. Treasury, which include funds used for the daily operations of the government.

Discount Rate

This refers to the cost of borrowing for commercial banks and various deposit institutions, derived from their area's Federal Reserve Bank lending service.

Banks Borrow

Banks borrow refers to the process by which banks take loans from other banks, financial institutions, or the central bank to maintain liquidity and meet their loan obligations to depositors.

Cash Reserves

Funds that a person or entity keeps on hand to meet short-term and emergency funding needs.