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The American economy…read more

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1. The Economic Boom
Why did the USA experience a boom in the 1920's
· Experiences the "multiplier effect" Where the growth of one industry stimulates another
· The growth of the car industry Rubber and Glass
· The development of electricity products such as vacuum cleaners & fridges
· Reasons
· Natural resources
· had plenty of oil, coal, iron and wood which provided the foundation for growth
· Cheap Labor
· immigrants from Germany, Poland, provided a big supply of cheap unskilled labour
· WW1
· didn't enter, able to supply food and materials which fuelled growth, borrowed, Invest, farmers
· Government
· "Laissez Faire" & Rugged Individualism. Little involvement, profits, business is business
· McCumber tariff
· raised import duties = home goods. Reduction in income tax = more spending…read more

Slide 4

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The economic boom
· Technology
· cheap power, electrical goods, mass production, new plastics, skyscraper's
· Consumerism
· Av. Wage increase 8%, 1927 63% had electricity, oil usage x2, gas x4, spiral of
· Credit
· credit schemes allow hire purchase, everybody have goods, seems more money.
Half sold were
· Confidence
· prepared to buy, invest, encouraged to spend, that prosperity and success was a
· Isolationism
· after1919, placed import tariffs to lure of competition, people bought US goods.…read more

Slide 5

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The Economic Boom
Why was there a boom on the stock market?
· Rose steadily up to 1928/9 where · Speculation meant that many Americans
drastically rose. "even the shoeshine boy" were encouraged to invest in the stock
had shares. market.
· This meant people were willing to buy · Interest was high at 7% so there would be
shares as they were confident they were big profits
to rise. The USA began to speculate. · Many investors borrowed money to buy
· People would "buy on the margin" borrow shares
money to buy shares, hoping the profit · Summer 1929, $8.5 billion had been
would pay it back borrowed.
· 1928 there was a bull market and in 1929
1.1 billion shares were sold. 25 million
people were involved.…read more

Slide 6

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The Economic Boom
How important was the car industry?
· Henry Ford in 1909 founded Ford in Detroit, the Model T saved money "any colour as long as it was black"
· The assembly line or magic belt allowed parts to be brought to workers, saved time. 1920 = car per 10secs
· He believed in hard work and doubled wages to $5, reduced shifts to 8 hours and had a 3rd shift to be 24/7
· He would advertise attractive women: Would encourage men, and promote female drivers
· His methods enabled him to lower the price to $295 in 1926. As a method of credit...Hire Purchase
· The impact of Model T
· By 1925 half the cars were Model T
· 1927, new Factory, biggest in the world, it employed around 80,000 workers
· Used steel, wood, petrol, rubber, provided jobs for over 5 million people. 90% of Petrol, 80% of Rubber
· Hire purchase enabled most families to afford a car
· Knock on effect on leisure ­ restaurants and hotels were reachable by car.
· People could travel further to get to work, so less unemployment
· Rural areas, farmers could get to places quicker so wives weren't alone
· It was no longer a rich persons privilege: 1 car to every 5 people in America
· Rose from 1.9 million in 4.5 million in 1929…read more

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