Topic 1 - 1920s Economy

Question 1

What evidence is there that there was an economic boom in 1920s America?

Answer 1

1. Gross National Product rose by 40%.
2. American industrial production doubled.
3. Unemployment fell from 11.9% (1921) to 1.9% (1926).
4. Income per person rose by 27%.
5. Sales of consumer products increased (e.g. by 1920, only 60,000 radios had been sold; by 1929, this had increased to 10 million)

Question 2

What proportion of the American workforce was unemployed in 1921 (%)?

Answer 2

11.9%

Question 3

What proportion of the American workforce was unemployed in 1926 (%)?

Answer 3

1.9%

Question 4

By how much (%) did personal income rise in the 1920s?

Answer 4

27%

Question 5

What happened to industrial production in America in the 1920s?

Answer 5

It doubled

Question 6

How did America help Britain and France’s war effort during the early part of WWI (1914-17)?

Answer 6

America lent money to its allies, and sold arms and munitions to GB and France.

Question 7

In which industry did America overtake Germany after WWI?

Answer 7

Chemical Industry

Question 8

Why did the First World War help the American economy to boom?

Answer 8

1. US industries made more money selling food, arms and munitions to the Allies → profits invested to develop/expand US industries.
2. America did not suffer damage to their industry and economy during the war → able to overtake European competitors in key industries and trade → greater demand for US goods → greater profits for US industry.
3. USA lent money to the Allies → loans paid back to America in 1920s, including interest → this money was invested to expand American industry.

Question 9

Name three Republican government policies.

Answer 9

1. Laissez-faire
2. Tariffs
3. Low taxation

Question 10

Which Act was introduced in 1922, which increased tariffs higher than ever before?

Answer 10

The Fordney-McCumber Tariff Act

Question 11

When was the Fordney-McCumber Tariff Act introduced?

Answer 11

1922

Question 12

Why did Republican government policies encourage the economic boom?

Answer 12

1. High tariffs increased the price of foreign goods → American consumers were more likely to buy cheaper American products → kept the money in America and allowed American industries to prosper.
2. Laissez-faire allowed US businesses to manage themselves → businesses had the freedom to maximise their profits without rules and regulations (e.g. increase working hours and lower wages).
3. Low taxes → consumers had more disposable income → increased demand and sales of consumer goods, and investment in shares.
   Low taxes → companies left with more money to re-invest to grow their business.

Question 13

What allowed Americans to get consumer goods and pay for them later in regular weekly and monthly instalments (“buy now, pay later”)?

Answer 13

Hire purchase

Question 14

What was hire purchase?

Answer 14

“Buy now, pay later”. Americans could get consumer goods on credit and pay for them at a later date in regular weekly and monthly instalments.

Question 15

What proportion of radios was bought on credit?

Answer 15

8/10

Question 16

Why did hire purchase lead to an economic boom in 1920s America?

Answer 16

1. Consumers could buy consumer goods without having the money to pay up front → more people were able to afford the new products → greater demand and sales of American products.
2. Easy availability of credit → climate of consumerism → encouraged Americans to buy the latest consumer products.

Question 17

Describe an assembly line.

Answer 17

1. Each worker only completed one specific task.
2. The skeleton product was kept in motion, moving to each worker along a mechanised production line.
3. Products were standardised.
4. Products could be produced more cheaply and in a shorter amount of time, leading to mass production.

Question 18

Who pioneered the use of the assembly line in American factories?

Answer 18

Henry Ford

Question 19

What was the name of Ford’s most famous car in this period?

Answer 19

The Model T

Question 20

What was the price of a Model T when it was first produced in 1908?

Answer 20

$850

Question 21

What had the price of a Model T fallen to by 1925?

Answer 21

$290

Question 22

By 1924, what had happened to the time it took to build a Model T?

Answer 22

Fell from 12.5 hours to 1.5 hours

Question 23

By 1927, how often did a Ford car come off a production line?

Answer 23

Every 10 seconds

Question 24

How many cars were produced in 1929 alone?

Answer 24

4.8 million

Question 25

What production method led to the mass production of consumer goods?

Answer 25

The assembly line

Question 26

Why did mass production help to cause the economic boom in 1920s America?

Answer 26

1. More goods could be produced → high consumer demand could be met.
2. Goods could be produced more cheaply → they became more affordable for a greater number of people → demand for products increased → greater sales and higher profits for industries/companies to expand (e.g. by creating more jobs).

Question 27

What proportion of Americans owned a car by 1929?

Answer 27

1 in 5

Question 28

Which other industries benefitted from the growth of the motor car industry?

Answer 28

1. Glass production (75% was used by the car industry)
2. Leather, steel and rubber
3. Petrol and petrol stations
4. Road-building (extent of roads doubled in the 1920s)
5. House-building in suburbs (e.g. Grosse Point Park outside of Detroit grew by 700%)
6. Motels and holiday resorts

Question 29

Why were more people able to buy consumer goods in the 1920s?

Answer 29

1. On average, personal income per person increased by 27% → Americans had more disposable income to spend on US goods.
2. Low taxes → Americans had more disposable income.
3. Hire purchase → Americans could ‘buy now, pay later’ (in monthly instalments) → enabled consumers to buy consumer products without having the money to pay up front.
4. Mass production methods → prices of consumer goods fell → goods became affordable to more people.

Question 30

Identify three groups of people who did not benefit from the economic boom of the 1920s.

Answer 30

1. Farmers
2. Coal miners
3. Traditional textile workers

Question 31

What happened to total farm income between 1919 and 1928?

Answer 31

Fell from $22 billion to $13 billion.

Question 32

How many farmers were forced off the land in the 1920s?

Answer 32

6 million

Question 33

How much did farm prices fall by in 1921 alone?

Answer 33

Fell by 50%

Question 34

In the 1920s, how much was the average farmer producing?

Answer 34

Enough to feed his family and fourteen others (which is evidence of overproduction).

Question 35

Why did farmers not benefit from the prosperity in 1920s America?

Answer 35

1. New innovations (e.g. combine harvesters and fertilisers) → increased crop yields → overproduction → crop prices fell → farmers could not make payments → farms repossessed by banks.
2. European economy was damaged after the war, and countries put tariffs on US products → US products were more expensive in European countries → demand fell → made problem of overproduction worse → farmers’ prices and incomes fell further.
3. Competition from other countries (e.g. Canadian wheat producers) → less demand for American farm products → made problem of overproduction worse → farmers’ prices and incomes fell further.

Question 36

What was the name of farmers given a proportion of the crop to sell rather than a cash wage?

Answer 36

Sharecroppers

Question 37

How many black farm workers lost their jobs in the 1920s?

Answer 37

Approx. 1 million

Question 38

What did the coal industry suffer competition from?

Answer 38

Oil and electricity

Question 39

How much did a coal miner earn compared to the national average?

Answer 39

One-third of the national average wage (e.g. men were paid $18 and women $9 for a 70-hour week.

Question 40

Why did the coal industry not benefit from the economic boom?

Answer 40

Coal industry suffered from competition from oil and electricity → demand for coal fell → profits in coal industry fell → workers fired or wages fell (or didn’t rise as fast as other industries).

Question 41

What proportion of homes had electricity by 1929?

Answer 41

Almost all urban homes; but only 10% of rural homes.

Question 42

What did traditional textiles suffer competition from in the 1920s (two examples)?

Answer 42

1. Man-made materials, e.g. rayon and nylon.

2. Cheap labour in the southern states.

Question 43

How many pairs of silk stockings were sold in 1900?

Answer 43

12,000 pairs

Question 44

How many pairs of rayon stockings were sold in 1930?

Answer 44

300 million pairs

Question 45

Why did the traditional textile industry not benefit from the economic boom?

Answer 45

1. Traditional textiles suffered from competition from new and cheaper synthetic (man-made) materials (e.g. nylon and rayon) → demand for textiles fell → workers fired or wages fell (or didn’t rise as fast an other industries).
2. Traditional textile industries in the north suffered from competition from cheaper labour in the southern states → northern leather and textiles industry had to lower wages or cut workforce.

Question 46

Describe three problems facing the US economy by 1929.

Answer 46

1. Wealth inequality (60% lived below the poverty line by 1929)→ many families too poor to buy consumer goods → many of those who could afford to buy consumer goods had bought them → demand likely to begin to fall.
2. Hire purchase and investors “buying on the margin” → high levels of debt → if people became unable to pay back loans, banks and businesses would collapse.
3. Rising unemployment (5.2% in 1929).