Why was there an economic boom in the 1920s?

• Growing industries and mass production

  The growth of the motor industry was a massive boost for the US economy. Car production used 20% of America's steel, 65% of its leather and over 75% of its rubber and glass. More jobs were created. Industries started to use the assembly line to produce items quickly. This became known as mass production. Due to this goods became cheaper.
• The First World War

  When war broke out in 1914, the USA stayed out of it as part of a policy known as isolationism. Staying out of the war for the first two years allowed America to prosper financially. American banks loaned money to Britain and its allies that was used to buy food, supplies and weapons. This created many jobs in America and lots of business people became rich.

  When America eventually entered the war the war had a far smaller impact on them. By the end, they had become producer of the highest percentage of the world's basic goods.
• The consumer society

  In 1916. only 15% of American homes had electricity. But nearly 70% had it by 1927. This meant workers began to spend their money on ultra-modern electricity powered gadgets such as vacuum cleaners, radios, toasters and refrigerators. Huge demand for these products created jobs in the factories that made them.
• Who were the three Republican Presidents of the United States during the 1920s?

  Warren Harding, Calvin Coolidge, and Herbert Hoover
• What was the main economic policy adopted by the Republican Presidents in the 1920s?

  The policy was laissez-faire, meaning the government should leave the economy alone.
• What does laissez-faire policy imply for big businesses?

  It implies that big businesses were free to expand without government interference.
• What was the purpose of the Fordney-McCumber Tariff Act introduced by Harding in 1922?

  To impose a tax on goods from foreign countries.
• How did the Fordney-McCumber Tariff Act affect the prices of foreign goods compared to domestic goods?

  It made foreign goods more expensive than domestic goods.
• What economic policy is described by the term protectionism?

  Protectionism is a policy that encourages buying domestic goods over foreign goods.
• What did Hoover believe in addition to laissez-faire policies?

  He believed in rugged individualism, meaning people should solve their own problems.
• How does rugged individualism contrast with government assistance?

  Rugged individualism suggests that individuals should not depend on government help.
• New ways to buy and sell

  Effective advertising campaigns were used to sell products. Billboards, newspapers and magazines urged people to buy the latest gadget. People took advantage of the 'buy now, pay later' schemes. This was also called hire-purchase plan. Six out of ten cars were bought this way.