During the 1920s, farmers received lower prices for their crops than they did during World War I. Why?
The government regulated interstate commerce.
The Federal Reserve inflated the money supply.
Farmers overproduced farm crops.
Foreigners increased purchases of American produce.
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In the early 1930s, the United States and much of the rest of the world faced severe economic problems. Many factories and stores closed, and people were out of work. Many families had little money to buy food. Some were desperate and were even willing to think about a new government system that could deal with the problems. These years are remembered as the “Great Depression.”
Some history books mark the start of the Depression as October 29, 1929. On that day, the value of stocks traded in the New York Stock Exchange dropped dramatically. In just three days, investors lost over $5 billion. By the end of the year, stock values dropped another $11 billion. Banks and investment companies that had put money in stocks lost fortunes. Factories began to close, laying off workers. Hard times were coming.
However, for Iowans and the Midwest, hard times had started about ten years earlier. During World War I, the government guaranteed farmers high prices for their crops and livestock. Farmers put more acres in cultivation and increased the size of their herds. They borrowed money from local banks to buy more land and machinery. As the demand for land increased, so did its price, and sales of Iowa farmland rose sharply.
In 1920, however, the government ended its guarantees. Farm prices were allowed to drop back to natural prices—determined by supply and demand. In this case, there were big supplies. Farmers continued to produce at high levels and soon surpluses appeared. As a result, prices for crops and for land fell. Those who had borrowed money could not pay off their loans. Even if they sold their farms, the money they received sometimes was less than what they owed. When banks could not collect the money they borrowed, they could not repay the people who had deposited money in their bank accounts. Many Iowa banks closed, and depositors lost their money. Around the state, 167 banks closed in 1920. That number rose to 505 in 1921. For several more years the number of bank failures remained high.
Low crop prices hurt farmers, but there were other factors at work. Farm families had to pay high prices for farm machinery through the 1920s. And rates to haul grain were much higher than they had been before the war. Many rural areas had built new schools and put gravel on country roads when times were good. Because they were still paying for those improvements, taxes were high. Many local school boards asked teachers to accept less pay for their work. Sometimes teachers resigned rather than accepting lower wages.
What made many Midwesterners angry was that the eastern cities seemed to be doing well. Before the collapse in 1929, wages for city workers were rising, and businesses were doing well. Most farm families still did not have electricity in their homes, and rural schools were clearly falling behind the educational instruction that town schools could offer.
Things became worse in the 1930s, but for many farm families the 1920s were a time of serious economic challenges, too. so the answer would be B