WEST-E Social Studies Practice Test 2025 – Comprehensive All-in-One Study Guide for Exam Success

During the bank failures of the 1920s, depositors exhibited a significant level of concern regarding the safety of their funds. This concern was heightened by the lack of government protections for deposits, leading many individuals to fear that they would lose their life savings in the event of a bank closing. As a direct response to this anxiety, many depositors opted to withdraw their savings from banks. This behavior was driven by the instinct to safeguard their money during a time of financial uncertainty, as people prioritized immediate access to their cash over potential longer-term financial strategies.

The economic context of this time also contributed to the decision to withdraw funds. The fear of bank insolvency was widespread, and many individuals preferred to keep cash in hand rather than risk it being tied up in an institution that could fail. This withdrawal behavior further exacerbated the challenges facing banks, as withdrawing large amounts of capital created liquidity problems and often led to more bank failures, creating a cycle of mistrust and panic.