Topic 1 - 1920s U.S. Economy (Understanding) Flashcards
1
Q
What evidence is there that there was an economic boom in 1920s America?
A
- American industrial production doubled.
- Unemployment fell from 11.9% (1921) to 1.9% (1926).
- Wages increased by 11%.
- Sales of consumer products increased.
2
Q
In what ways did the First World War help the American economy to boom?
A
- US industries made more money selling food, arms and munitions to the Allies → profits invested to develop/expand US industries.
- USA lent money to the Allies → loans paid back to America in 1920s, including interest → this money was invested to expand American industry.
- 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
Q
In what ways did Republican government policies encourage the economic boom?
A
- 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.
- 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).
- 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.
4
Q
Why were more people able to buy consumer goods in the 1920s?
A
- On average, wages increased by 11% → Americans had more disposable income to spend on US goods.
- Low taxes → Americans had more disposable income.
- 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.
- Mass production methods → prices of consumer goods fell → goods became affordable to more people.
5
Q
In what ways did hire purchase help to sustain the boom in 1920s America?
A
- 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.
- Easy availability of credit → climate of consumerism → encouraged Americans to buy the latest consumer products.
6
Q
How did production on an assembly line differ from more traditional methods of productions?
A
- Each worker only completed one specific task.
- The skeleton product was kept in motion, moving to each worker along a mechanised production line.
- Products were standardised.
- Products could be produced more cheaply and in a shorter amount of time, leading to mass production.
7
Q
In what ways did mass production help to sustain the economic boom in 1920s America?
A
- More goods could be produced → high consumer demand could be met.
- 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).
8
Q
In what ways did mass production affect people’s lives?
A
- Prices of consumer goods fell → more people could afford to buy them → more people owned new consumer goods (e.g. radios, vacuum cleaners, motor cars).
- Higher demand for mass-produced goods → companies were making more money → increased job opportunities.
9
Q
In what ways did the stock market help the US economy to expand in the 1920s?
A
- The stock market boom enabled individual shareholders to make profit → they had more disposable income to reinvest in shares or to spend on consumer goods.
- Sale of shares → money for companies → invested to expand their business.
10
Q
In what ways did American attitudes help the economy to boom in the 1920s?
A
- Spending money was seen as a positive quality, and part of being American → climate of consumerism → Americans wanted their home to be filled with latest consumer goods → increased spending on US goods.
- Confidence that prosperity would continue to grow → Americans borrowed money → more Americans were buying consumer products (hire purchase), or investing in shares (“buying on the margin”).
11
Q
Why did farmers not benefit from the prosperity in 1920s America?
A
- New innovations (e.g. combine harvesters and fertilisers) → increased crop yields → overproduction → crop prices fell → farmers could not make payments → farms repossessed by banks.
- 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.
- Pests destroyed crops → farmers had less crop to sell → reduced profits → farmers could not make payments → farms repossessed by banks.
12
Q
In what ways did competition create problems for the coal and textiles industries in 1920s America?
A
- 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).
- 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).
- 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.
13
Q
Describe two problems facing the US economy in 1929.
A
- 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.
- Hire purchase and investors “buying on the margin” → high levels of debt → if people became unable to pay back loans, banks would collapse.
