Which economic event was triggered by overproduction and railroad speculation, leading to a major depression in the 1870s?

Which economic event was triggered by overproduction and railroad speculation, leading to a major depression in the 1870s?

• A. Panic of 1837
• B. Panic of 1849
• C. Panic of 1873
• D. Panic of 1893

Answer: (C)

When too much is produced and the economy overextends itself on big infrastructure projects, financial instability can trigger a crash. After the Civil War, rapid industrial growth and a railroad boom led to overbuilding and heavy borrowing. Prices for goods fell, profits shrank, and many railroads and banks found themselves overextended. The collapse of a major railroad financier toppled confidence, bank runs spread, credit dried up, and unemployment rose as production contracted. This combination sparked a severe downturn that lasted through much of the 1870s—the Panic of 1873.

When too much is produced and the economy overextends itself on big infrastructure projects, financial instability can trigger a crash. After the Civil War, rapid industrial growth and a railroad boom led to overbuilding and heavy borrowing. Prices for goods fell, profits shrank, and many railroads and banks found themselves overextended. The collapse of a major railroad financier toppled confidence, bank runs spread, credit dried up, and unemployment rose as production contracted. This combination sparked a severe downturn that lasted through much of the 1870s—the Panic of 1873.