REASONS FOR THE ECONOMIC BOOM

republican policies
1. Laissez Faire-- Means 'leave alone'. Republicans believed that if the government didn't interfere with people's lives and businesses then they would be free to make money
2. Tariffs-- Taxes placed on imported foreign goods to make them more expensive, which forced Americans to buy American goods. American companies increased their sales
3. Low Taxes-- so people had more money to spend on American goods, therefore helping the economy grow.
4. Encouraged to build the development of large trusts-- Big companies which dominated a market eg. Rockefeller-oil. Big businesses boomed under the republican policies
Ford and the motor industry
1. In order to make his cars more quickly and cheaply, Henry Ford needed a new method of production; The moving assembly line. An electric conveyer would bring the parts to the workers (who always stood in the same place) who would be responsible for one area.
2. By 1925, 500000 people worked in the motor industry
3. First used in detroit.
4. A car was produced in one-tenth of the time previously taken. (From 14hrs to 93 minutes)
5. Model T Ford- 15 million made between 1908-1925.
6. 1928, Model T cost $295, three months wages for the average worker.
7. By 1925, 500000 people worked in the motor industry and by 1929, 4 million people's jobs were linked to it.
8. Car production used up 20% of America's steel, 80% of her rubber, 75% of her plate glass and 65% of her leather
9. By the end of the 1920s, American cars used seven billion gallons of petrol a year. This helped to create jobs in the oil industry and made the oil state of Texas rich.
10. Jobs were available in road building, hotels, garages, roadside restaurants ect.
Consumer goods - mass production
1. 1916 only 15% of Americans had electricity - 70% had it by 1927
2. This encouraged Americans to buy newly invented gadgets - fridges, vacuum cleaners, telephones ect.
3. Huge demand for these goods create jobs in the factories that created them. These newly employed people had more money so they could buy new consumer goods.
  1. THE CYCLE OF PROSPERITY
Advertising
1. New methods were created to sell these consumer goods - Advertising
2. These adverts were placed on billboards and put into newspapers and magazines
3. Mail order catalogues were sent out for those who didn't live near big stores while cinema and radio played adverts too
4. Famous slogan - 'Keeping up with the Joneses'. 1927 - companies spent $1.5 billion on advertising
Hire Purchase
1. Americans felt so confident that in the 1920s they started to borrow money to buy goods. Companies increasingly offered 'Hire Purchase' - being able to pay for good by instalments.
2. You did not have enough money to buy a product outright - you only had to pay a little bit each week or month - poorer people could now buy products. This increased sales massively. More demand meant more goods, which then meant more jobs.
3. 8/10 radios and 6/10 cars were bought on hire purchase/
Stock market and share purchase
1. Many people bought shares in companies as investments - they would get a dividend (share of the profits) each year.
2. Increased demand meant the share price went up - a 'bull' market.
3. People thought the value of shares would continue to increase. They even borrowed money from banks to buy shares - buying shares 'on the margin'. They used their houses to guarantee the loan and sold to buy shares soon after purchase to make a profit and pay back the loan. People now had more money to spend on American products.
4. Banks were lending more money than they actually had, confident loans would be paid back before customers wanted to withdraw their savings. Banks were also buying shares to make money.
5. Share prices increased during the 1920s on average by 300 percent. 1920 - 4 million Americans owned shares, 1929 - 20 million. Companies got money from shares to invest and expand their business.

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REASONS FOR THE ECONOMIC BOOM

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