WEST-E Social Studies Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the WEST-E Social Studies Test. Learn with flashcards and multiple choice questions, each offering hints and explanations. Boost your confidence for the examination!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What was a significant consequence of bank failures in the 1920s?

Increased consumer confidence in banking
A chain reaction affecting the entire banking system
Rapid growth of bank assets
Reduction in government regulations

The correct answer is: A chain reaction affecting the entire banking system

The answer highlights that bank failures in the 1920s had a significant consequence of triggering a chain reaction that affected the entire banking system. During this period, a wave of bank closures created a crisis of confidence among depositors, leading many to withdraw their money from banks. This rush to withdraw funds resulted in a liquidity crisis, which further exacerbated the problems for financial institutions. As more banks failed due to their inability to meet withdrawal demands, other banks also faced increased scrutiny and loss of deposits, leading to a widespread deterioration of the banking system. This interconnectedness is crucial to understanding the economic landscape of the time; when one bank failed, it not only impacted its customers but also undermined the stability of neighboring banks and the financial system as a whole. Thus, bank failures were not isolated incidents but rather indicative of deep-seated issues within the economy that could spiral out of control due to the interdependence of financial institutions.