Uneven distribution of Income/Overproduction

Question 1

When business profits doubled in the 20’s, which got a larger share of the profits: the rich who had invested in the companies or the workers through higher wages?

Answer 1

The rich who had invested in companies

Question 2

What do the rich typically do with additional money they get?

Answer 2

invest it

Question 3

What do the poor typically do with additional money they get?

Answer 3

spend it on needs and wants

Question 4

What do the middle class typically do with additional money they get?

Answer 4

spend some of it and invest some of it

Question 5

When the rich and middle class invest money, how does that help businesses?

Answer 5

they get money needed to expand and produce more

Question 6

When the poor and middle spend money, how does that help businesses?

Answer 6

they are able to sell the products they are producing

Question 7

What happens if the balance between spending and investing goes too much on the side of spending?

Answer 7

Companies are not able to expand fast enough to meet the demand for products, resulting in shortages and higher prices

Question 8

What happens if the balance between spending and investing goes too much on the side of investing?

Answer 8

Businesses expand too much and produce more than they can sell, resulting in overproduction

Question 9

Why is it important to keep a balance between how much money the poor and middle class are spending and how much money the rich and middle class are investing?

Answer 9

Having a balance between spending and investing keeps a balance between how many products are produced and how many are sold.

Question 10

What happened in the 1920’s in terms of the balance between how much the rich invested and how much money the poor and middle class had to spend?

Answer 10

The rich got so much more money than the poor and middle class that companies ended up expanding too much and people were not able to buy everything they produced

Question 11

The extreme uneven distribution of wealth in the 1920’s caused what problem?

Answer 11

overproduction

Question 12

How does overproduction contribute to the vicious circle?

Answer 12

Businesses have to cut production because they can’t sell everything

Question 13

What hid the developing overproduction problem at first?

Answer 13

people were using credit