What does buying stock 'on margin' mean?
Show answer and explanation
Correct answer: Buying stock with money borrowed from a broker
Buying on margin means purchasing stocks with borrowed money while paying only part of the price upfront. This practice increased profits when prices rose but created severe losses when prices fell.
Keep practicing
More Causes of the Great Depression questions
- How did buying on margin contribute to the stock market crash?
- Which term describes the rapid buying of stocks mainly because investors expected prices to keep rising?
- Why were many stock prices considered overvalued before the crash?
- Which economic problem affected many American farmers during the 1920s before the Great Depression?
- How did unequal distribution of income contribute to the Great Depression?
- What is overproduction in the context of the Great Depression's causes?