USA - 3+4. Economic Boom + End of Prosperity

List the 8 causes of the Economic Boom

Natural Resources + Immigration, Impact of WW1, Electrification, Mass Production, Advertising and Consumerism, Finance + Hire Purchase, Republican Government Policies, Confidence

How did Natural Resources and Immigration cause the Economic Boom?

America had a plentiful supply of raw materials (oil, coal, wood, iron etc.) which provided a foundation for growth before WW1. They had a supply of cheap labour due to high immigration rates so demand for jobs could be filled to support growing industries and services.

How was WW1 a cause the Economic Boom?

USA did not join the war until 1917. Initially they provided food, raw materials and munitions to other countries. They made profits from this which could be used to invest in the economy and services/infrastructure. WW1 stimulated technology advances and mechanisation.

List 3 key words for the WW1 cause of the Economic Boom

Technology advances, Mechanisation, Profits

Explain the cause of Electrification in causing the Economic Boom

Electrical power led to the creation and use of electrical goods and these innovations grew the market and demand increased. Provided cheaper, reliable and efficient power for factories + industries so they gained more profits.

Give 2 examples of a product designed due to Electrification

New 'beats-as-it-sweeps-as-it-cleans vacuum by Hoover in 1926 and Monitor-Top refrigerator in 1927 by General Electric Company

Give a statistic about electricity in homes due to Electrification

By 1927 63% of homes had electricity

Explain how Mass Production caused the Economic Boom

The assembly line known as the Magic Belt sped up production and standardised products made prices of goods cheaper so there was more demand. It also grew other industries due to transport and tourism e.g hotels, gas stations, oil industries etc.

Give an example of a car created and the inventor

Henry Ford invented the Model T Car

Give a statistic on mass production in the car industry

In 1913 the Ford Factory in Detroit produced a car every 3 minutes but by 1920 it was every 10 seconds

Give a statistic in the number of cars in American due to mass production

From 1920-1929 the number of cars rose from 7.5 million to 27 million

Give a statistic about the price changes in the Model T car due to mass production

In 1909 it cost $1200 but by 1928 it was only $295

Explain how Advertising and Consumerism caused the Economic Boom

It encouraged purchases and increased awareness of new products especially due to electrification which increased demand. The designers studied psychology of consumers to increase demand. The average wage also increased allowing consumers to have more disposable income.

Give a statistic about clothing sales due to advertising

Sales went up 427% in the 1920's

Give a statistic about the average wage increase in the 1920's

It increased 8% from 1923-1929

What was hire purchase?

Goods were allowed to be paid for in instalments

Why did department stores grow?

Demand for consumer goods especially electrical appliances increased and they allowed customers to choose goods themselves which sped up shopping and queues to accommodate for the demand.

Give facts about the first supermarket in 1916

It was in Tennessee and was called Piggly Wiggly. It was opened by Clarence Saunders in 1916.

Why was instalments/hire purchase a cause of the Economic Boom?

Customers could buy goods more easily with disposable income even if they didn't have enough money immediately and it made goods accessible to lower classes. Therefore demand increased growing other businesses too.

What was the Laissez-Faire policy?

Belief governments should leave businesses to take their own course without interfering in the hope to create high profits, more jobs and good wages.

What was 'Rugged Individualism'?

A belief people achieved success by their own hard work

What was 'Protectionsim'?

Isolationism to put tariffs on imported goods to foreign countries to make profits and keep the demand for American-based products.

Give the name of the Tariff which raised import duties to the highest level and when was it?

Fordney-McCumber Tariff in 1922

Which government was in control during the Economic Boom and what were their beliefs?

Republican Government focused on building the economy using Laissez-Faire policy and Protectionism and Rugged Individualism

Explain the Cycle of Prosperity in the car industry

Mass production increased production rates for demand. Standardised parts are need to industries in steel, glass and rubber produce and sell more, growing their businesses. This provides jobs giving people income to spend on consumer goods. Related industries also grow in transport and tourism e.g gas stations and hotels.

What was booming in the 1920's?

Consumer goods, construction, car industry, fashion, entertainment

What is the term for someone who lends money to stock buyers?

A Stock Broker

What was the problem with borrowing money?

There were no regulations on how much money could be borrowed and how often

Describe briefly the stock markets before and during the Crash

Always fluctuating slightly but Wall St was a complete collapse of the market and it was 'saturated' due to falling consumer demand but overproduction.

How do companies and shareholders raise money from stocks?

Companies float shares on the stock exchange and shareholders get a DIVIDEND every year which is part of the profits made and sell shares for more once their value has increased.

What is 'buying on the margin'?

Borrowing money in the short term with the aim to buy and sell shares for a profit and pay back the loan.

Give a statistic of the number of shareholders by 1929

20 million

Give 2 terms to describe a popular market or sparse.

Bull Market, Bear Market

What influenced people to buy shares?

Celebrities like Charlie Chaplin promoted them and everyone was investing to make profits so people followed to do the same thing.

When was 'Black Thursday'?

24th October 1929

When was 'Black Tuesday'?

29th October 1929

What happened on Black Thursday?

Prices fell dramatically and 13 million shares were traded that day

What happened on Saturday 26th October 1929?

President Hoover spoke to reassure confidence in the stock market

What happened on Black Tuesday?

16.5 million shares traded and many suicides were reported

How did Over speculation and Panic Selling cause the economic crash?

In the summer there was a Bull Markett and everyone was buying on the margin and speculating. Panic selling started due to falling prices which led to even lower prices and confidence had been lost. Trigger Cause

How was Overproduction a cause of the economic crash?

More goods produced than disposable income consumers hadand goods couldn't be sold abroad to due tarrifs/taxes. Bosses cut wages and sacked workers leading to more unemployment so people had less income to spend on consumer goods.

How was a Fall in Consumer Demand a cause of the economic crash?

Limited wealth led to less demand and therefore overproduction. Almost 50% of families had income of less than $2,000 a year so couldn't afford consumer goods.

How was a Boom in land prices a cause of the economic crash?

Speculators jumped on property and borrowed money to then sell property for profits. In 1926 the value fell so sharply in Florida leaving people in bad debts and negative equity so they couldn't afford consumer goods.

How was availability of easy finance and credit a cause of the economic crash?

Instalments due to hire purchase allowed money to be borrowed to pay for goods. It eventually lead to higher prices.

Give a statistic about the borrowing of money in relation to shares

75% of the price of shares were borrowed

List 4 immediate impacts of the crash

Financial issues, personal issues, Unemployment, Urban + Rural problems

What was the financial impact of the crash? Give statistics

StockBrokers couldn't pay debts so 659 banks went bust in 1929 and over 2000 in 1931. Money couldn't be loaned.

Give statistics about the levels of unemployment due to the crash

By end of 1929 only 2.5 million people were unemployed (5%) but this increased as confidence disappeared and people stopped buying and companies laid off more workers

What happened in urban areas after the crash?

People lost their homes because they couldn't pay the rents or mortgage. Became Shanty towns and lots of homeless people. Time of the Hobo as men travelled around the country in search of work.

What happened in rural areas after the crash?

Farmers had overproduced food and couldn't pay their rents so they were evicted. 1930's became known as 'Dust Bowl' due to exhausted soil. They kept producing to sell as much as they could to earn wages.

Describe the impact of the crash in 4 words

Spiral of Economic Depression