The boom
Reasons the US economy boomed in the 1920s
In the 1920s, the American Activities in a country concerned with the making, distribution, and use of goods and services. expanded and changed dramatically. Many businesses were making large profits, unemployment was low and wages increased. This was a period of A period when the economy expands and grows.
Reasons for the growth of the US economy
The impact of World War One
The American economy was not severely affected by World War One. This was partly because the fighting took place in Europe, and America was only directly involved in the last two years of the war (1917-1918).
In fact, America鈥檚 economy grew during and after the war, and it had very little wartime debt. American A person or company that makes something from raw materials or from an assembly of component parts. took advantage of new business opportunities created by European businesses ruined by the war. American banks also loaned money to the country鈥檚 allies, such as Britain, so they could buy food, weapons and equipment from America. America made profits from these loans.
Republican government policies
One of the two major American political parties. Republicans tend to hold a more conservative viewpoint on politics and society. President Calvin Coolidge declared in 1924:
The chief business of the American people is business.
This highlights how the Republican government prioritised economic growth for businesses through its A law passed by the government that must be followed. In 1922, the Fordney-McCumber Tariff put high taxes on Imports are items that come into the country from abroad. This made foreign goods more expensive to buy, so Americans bought more US-produced goods. This boosted US business and gave the government extra The income earned by a business over a period of time from selling its goods or services.
Overall, the policy direction was guided by the principle of When a government doesn't believe in interfering in the lives of individuals and businesses. For the Republicans, liberty or freedom to live your life and run your business was one of the most important roles of government. The government did not intervene, instead leaving businesses to drive the economy towards greater Being successful or thriving, particularly with regard to finance. Business taxes were low, which allowed businesses to invest their profits into expanding and creating more jobs. A tax that is paid in order to pay for services, eg education and health. was also low, so people had more Money available for spending and saving once taxes have been deducted. to spend.
Technological innovation
By 1927, 63 per cent of American homes had access to electricity. Electrical power began to replace other older energy sources, such as coal and gas. This stimulated the production and purchase of electrical goods such as refrigerators, radios and vacuum cleaners.
Consumerism
Prosperity during this time was fuelled by a new national culture that encouraged Americans to spend money on new luxury products. Advertising was very effective, so many people desired the latest items and trends. The 1920s saw a wider range of advertising. As well as newspapers and magazines, there were adverts on billboards, in cinemas and on the radio. Famous film and sports stars were used to promote brands.
As wages rose and workers had more disposable income, products that previously only the rich could afford now became more accessible. Additionally, A method used to buy an asset in instalments whereby the asset only belongs to the person or business after the very last repayment. and credit schemes helped people to 鈥榖uy now and pay later鈥 on certain items.