Reasons for the Economic Boom in America during the 1920s

Detailed and in depth information about the different reasons for the boom.

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Reasons for the Economic Boom…read more

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Republican Policies
· `Laissez-faire' was a policy which the Republican government followed. It
meant that the government was going to let businesses be independent of
the government rather than the government interfering in them.
· As part of this policy the government imposed a low tax rate on goods so
that more people can afford consumer goods and more are bought,
increasing the profits of businesses.
· The government also passes the Fordney McCumber Act in 1921. This act
put up tariffs against foreign goods, which made them more expensive
than American goods. As a result more American goods were bought. The
act therefore allowed the American industry to develop while also
protecting it from foreign competition.
· The Republican government also allowed the development of trusts. This
meant that super-corporations dominated sectors of industry, allowing
American industry to be run efficiently by business men who knew what
they were doing. The government let the corporations do what they
wanted.…read more

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New Technology and Industry
· Mass production was when goods were produced on a massive scale. This
meant that large amounts of good were produced quickly and cheaply
making them more affordable for Americans to buy. For example there
was a massive increase in the number of radios sold; in 1920 60,000 radios
were sold, but come 1929, this number rose to 10 million!
· Henry Ford revolutionized the car industry. He came up with the idea of an
assembly line which meant that there was 1 Model T car being produced
every 10 seconds.
· This meant that in America one in five owned a car compared to one in 43
in Britain and 1 in 7000 in Russia.
· By 1929 the number of cars being produced every year rose from 4000 in
1920 to 4.8million
· The car industry stimulated other industries such as petrol, glass and
· This huge leap in industry proved America's position as being the
wealthiest country in the world in the 1920s.…read more

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Advertising and Credit
· After the Great War, propaganda skills because
transferred to advertising. More and more adverts
for consumer goods appeared on billboards, in
magazines, in cinemas, on radio etc, and they
encouraged Americans to spend their money.
· Also, more people bought on credit. There were
many Hire Purchase and `Buy Now Pay Later'
schemes. Around 6 of 10 cars were bought on
credit.…read more

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Growth in the stock Market
· Americans also made money by buying shares. As
companies did better and better so did the shares.
Many Americans sold their shares when they were
doing really well. This made them a profit as the
share was sold for more than its initial value when
it was bought.
· `Buying on the margin' meant that some people
bought share by borrowing money from the bank.
Once they made enough money they would pay
back the banks while also making a profit.…read more

Slide 6

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State of Mind
· Americans believed that they had a right to
· This belief led them to believe that spending was
better than saving and so Americans were more
confident to use credit to buy consumer goods
and shares.
· Without this confidence, America would not have
seen such an economic growth; less money would
have been spent, less goods would be bought and
companies would make less profit.…read more

Slide 7

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