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Boom to Bust: The Economy of the 1920s

The booming economy of the 1920s transformed American life through mass production, the rise of the automobile industry, and the consumer revolution. However, signs of weakness in the economy, such as debt and declining farm incomes, posed potential threats. This article explores the impact and potential consequences of these issues.

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Boom to Bust: The Economy of the 1920s

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  1. Warm-up: • Why do you think the US economy boomed after the war ended?

  2. The Economy During the 1920s

  3. How did the booming economy of the 1920s lead to changes in American life? • During the 1920s, the American economy experienced tremendous growth. • Using mass production techniques, workers produced more goods in less time than ever before. • The boom changed how Americans lived and helped create the modern consumer economy.

  4. Before 1920, only wealthy people could afford cars. Ford made the Model T affordable by applying mass production techniques to making cars. • A moving assembly line brought cars to workers, who each added one part. • Ford consulted scientific management experts to make his manufacturing process more efficient. • The time to assemble a Model T dropped from 12 hours to just 90 minutes. • Also raised workers’ pay & shortened their hours.

  5. Road construction boomed, and new businesses opened along the routes. • Other car-related industries included steel, glass, rubber, asphalt, gasoline, and insurance. • Workers could live farther away from their jobs. • Families used cars for leisure trips and vacations. • Fewer people traveled on trolleys or trains.

  6. The 1920s also saw a consumer revolution. Using installment buying, people could buy more. New products flooded the market. Advertising created demand.

  7. Advertising and Consumption • Grew with automobile industry • Billion dollar industry • New way to introduce modern technological products (washing machines, radios, vacuum cleaners, etc.) • Enticed consumers to spend money they did not really have • Consumer economy made life easier for urban women because rural areas still had no electricity

  8. Led to mass consumption of items not considered necessities • Cultural ideal mostly for middle class; criterion for considering self-worth • Brand names and chain stores • New method of buying—credit—installment plan—buy now pay later

  9. Throughout the 1920s, a bull market meant stock prices kept going up. • Investors bought on margin, purchasing stocks on credit. • Remained profitable as long as stock prices rose. Rising stock market prices also contributed to economic growth. By 1929, around four million Americans owned stocks.

  10. During the economic boom of the 1920s, cities grew rapidly. Immigrants, farmers, African Americans, and Mexican Americans were among those who settled in urban areas.

  11. More and more people who worked in cities moved to the suburbs. • Suburbs grew faster than inner cities. • Cities and suburbs benefited from the economic boom. Cities expanded outward, thanks to automobiles and mass transit systems.

  12. Farm incomes declined or remained flat through most of the 1920s. • Falling prices and massive debt from wartime borrowing hurt farmers. • Farmers definitely did not share in the prosperity of the 20s.

  13. Activity • Identify two potential signs of weakness in the economy of the 1920s, and predict what might happen if those problems are not solved.

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