U1 - Boom and Bust - The 1920s

Question 1

The Boom

Answer 1

• Favourable government Policies/Republican Governments
• Credit Boom
• The effects of WW1 (became rich, joined later)
• New business methods
• technical advances (rubber, plastic, glass)

Question 2

The Bust

Answer 2

• Weaknesses of banking system
• Overproduction under consumption (unemployed)
• International debt issues
• Uneven distribution of income/wealth
• Wall street crash (trigger of depression)

Question 3

The Bust

Weaknesses of banking system -

Answer 3

• Little regulation
• There was small state banks with limited assets and were not part of an national organisation
• Due to laissez faire policies of the government, reliability of banks were never checked
• These banks offered easy terms for loans which encouraged high levels of borrowing: contributed to crash

Question 4

The Bust

Weaknesses of banking system - Stats

Answer 4

• In 1921 there was over 30,000 independent banks

Question 5

The Bust

Overproduction under consumption

Answer 5

• The American economy was changing in the 1920s
• These new production methods, goods that were only available to wealthy people were now available to general public
• Goods: radios, watches, vacuums etc
• By 1929 those who could afford the goods already had them so the market was flooded with items that couldn’t be sold
• Confidence slipped and consumers began to try and save money, sale figures went down dramatically

Question 6

The Bust

Overproduction under consumption - Stats

Answer 6

• In the decade of the 1920s economic output increased by a staggering 50%
• By 1929 more than 23 million Model T’s were produced
• By 1920 more than 8 million Model T’s were produced
• By 1923 there were over 3 million radios in America

Question 7

The Bust

International debt issues

Answer 7

• Can argue that the Republican Governments desire to protect US businesses caused the crash
• Republican Governments had passed the Fordney McCumber tariff of 1922

Question 8

The Bust

International debt issues - Fordney McCumber tariff of 1922

Answer 8

• Placed high tariff on all imports so that people would buy American goods
• Both sides put tax on imports up (Europe and America)
• Foreign states also raised tariffs against the US goods: making it impossible for USA to export goods

Question 9

The Bust

International debt issues - Fordney McCumber tariff of 1922 - Led to

Answer 9

• US couldn’t expand to foreign markets
• Led to stockpiling of goods in USA leading to cut backs in production
• Eventually hit employment, profits and the value of shares
• Germany go bankrupted which didn’t help America as they gave them money after the war

Question 10

The Bust

Uneven distribution of income

Answer 10

• The rich got richer: Average incomes rise slowly
• Middle and low Americans were doing okay
• Many areas, north and mid west fared far better than states in the south
• Blacks were still worst than whites women also did not share in the prosperity

Question 11

The Bust

The Wall Street Crash

Answer 11

• October and November 1929
• Over 13 million shares were sold on the stock market
• ‘Black Tuesday’ over 16 million were sold
• Prices collapsed and kept falling until middle of November
• By November 1929, stock market lost $30 billion in value
• More than USA spent in WW1

Question 12

The Bust

The Wall Street Crash - Short term causes

Answer 12

• By end of 1929, shrewd investors knew the prices were false and started to sell their stock

Question 13

The Bust

The Wall Street Crash - Social and Economic effect

Answer 13

• Economic Depression
• Extreme Poverty
• Homelessness
• Collapse of farming
• Mass Migration

Question 14

The Bust

The Wall Street Crash - Buying on Margin

Answer 14

• People would borrow money to buy shares

- When the share goes up in price they sell it and pay back the bank and keep the profits

Question 15

The Boom

Republican Governments

Answer 15

• 1920s saw 3 Republican Presidents
• Warren Harding, Calvin Coolidge, Herbert Hoover
• Followed Laissez faire pro-business policies
• Included imposing tariffs o foreign goods and cutting taxes and regulations on business

Question 16

The Boom

Natural Resources

Answer 16

• American had an abundance of materials such as coal, oil and land
• These were used to produce goods that would be purchased by the population
• Became very rich because of these materials
• Oil was first found in Texas, 1901

Question 17

The Boom

Effects of World War 1

Answer 17

• The war had ruined much of Europe
• US was now the world’s largest economy
• Europe depended on the USA for much of its imports
• Need for quick wartime production had led to improvements of efficiency

Question 18

The Boom

Credit

Answer 18

• A new way of paying for goods emerged called Hire Purchase
• Involved paying a small deposit and the balance in instalments
• Allowed people in work to be able to afford the latest goods

Question 19

The Boom

Confidence

Answer 19

• Americans were confident they would remain in employment

- They were therefore not afraid to go into debt to buy consumer goods

Question 20

The Boom

Advertising

Answer 20

• Advertising persuading many Americans that the continued purchased of new good was a necessity
• Fuelled demand for these goods
• Demand grew and so did production

Question 21

The Boom

Methods of Production

Answer 21

• New methods of production such as ‘assembly line’ allowed huge amount of goods to be produced
• Known as mass production
• Most commonly associated with Henry Ford’s automobile company
• Helped create middle class

Question 22

The Boom

Economic Boom - Saying

Answer 22

L - Laissez Faire
A - Assembly Line
C - Credit
K - Knowledge

P - Position of USA in war
A - Advertising
N - New consumers goods 
T - Tariffs
S - Share confidence

Question 23

The Boom

Added Notes

Answer 23

• Between 1922 and 1929 the value of what the USA produced every year increased by 40%
• During the same period average income increased by 27%

Question 24

The Boom and Bust

The depression

Answer 24

• Herbert Hoover in 1928 - “We in America today are nearer to the final triumph over poverty than ever before in the history of the land”

Question 25

The Boom and Bust

Unemployment

Answer 25

• 1932 it reached 25.2%
• Currently stands a 7% (nationally)
• No benefit system in America
• 50% in Cleveland Ohio desperate
• 1 million people were unemployed in New York

Question 26

The Boom and Bust

Cities

Answer 26

• People are going hungry and face starvation: Large food queues formed

Question 27

The Boom and Bust

Countryside

Answer 27

• Sheep were slaughtered and left to rot prices made it uneconomical to transport to cities