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What economic factors and conditions made the American economy appear prosperous in the 1920’s?. High gross national product (GNP) – total value of goods and services produced in a given period Low unemployment – satisfied workers

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what economic factors and conditions made the american economy appear prosperous in the 1920 s
What economic factors and conditions made the American economy appear prosperous in the 1920’s?
  • High gross national product (GNP) – total value of goods and services produced in a given period
  • Low unemployment – satisfied workers
  • Stock market values went steadily up - quadrupled between 1920-1929
what economic factor led to optimsim
What economic factor led to optimsim?
  • The growth of the GNP
  • This led to reckless spending by the American people – cars, vacuums, refrigerators, etc. – usually on credit
how did business benefit from welfare capitalism
How did business benefit from welfare capitalism?
  • Welfare capitalism – various benefits companies provide (like health insurance) to improve worker satisfaction and loyalty
  • As a result, union membership dropped; worker loyalty and satisfaction grew
how does the stock market work
How does the stock market work?
  • People buy stocks, which gives them a share in the ownership of a corporation
  • If a corporation does well, values of stock typically go up, making stock holders a profit
  • But, if stock prices go down, shareholders lose money
how did coolidge and harding view the relationship between business and government
How did Coolidge and Harding view the relationship between business and government?
  • Basically, that government should support, not interfere, with business practices
  • They believed in giving businesses the maximum freedom to profit and succeed
  • “laissez-faire” – to let alone
how did the rise of the stock market affect american investors
How did the rise of the stock market affect American investors?
  • As stock prices rose, more and more Americans began to invest in the stock market
  • Number of shares being traded in the U.S. went from 318 million in 1920 to more than 1 billion in 1929
  • It seemed to good to be true – some believed that everyone could get rich investing in the stock market
what were the basic economic weaknesses in the american economy in the late 1920 s
What were the basic economic weaknesses in the American economy in the late 1920’s?
  • Very uneven distribution of wealth – 5% of the workers made 70% of the country’s income; conversely the other 95% made 30% of the country’s income
  • Easy credit – too easy
  • Too easy to buy stock on margin
in what way was the easy availability of credit both a blessing and a curse
In what way was the easy availability of credit both a blessing and a curse?
  • It was a blessing in that it allowed more Americans to buy more products, which brought on more economic growth
  • It was a curse when consumers could not pay off their debts, purchases slowed
  • Warehouses started to be filled with un-purchased goods
what was a margin call
What was a margin call?
  • “buying on margin” – borrowing money to invest in the stock market; a borrower assumed he would pay back the loan with money made from stock prices going up
  • A margin call was a demand for payment of a margin loan if a stock’s value fell below a certain point
what events led to the stock market s crash in october 1929
What events led to the stock market’s crash in October 1929?
  • Sale of consumer goods declined
  • Rumors of a crash spread
  • Fears grew
  • Investors began to sell off stock
  • This began a snowball effect where stock prices plunged because there were no buyers
how did the big sell off of stocks begin
How did the big sell-off of stocks begin?
  • Some investors were nervous and began to sell off stocks
  • Others soon joined in
  • With no buyers, stock prices plunged
what were the effects of the crash on the economy of the united states and the world
What were the effects of the crash on the economy of the United States and the world?
  • Banks failed – many had invested stocks themselves, or given loans to stockbrokers to lend investors
  • Investors lost money
  • Consumers stopped buying
  • Nearly three million Americans lost their jobs
  • Such an impact on the American economy affected the world economy
what impact did the stock market crash have on individual investors
What impact did the stock market crash have on individual investors?
  • Almost all suffered
  • Couldn’t pay off debts – lost all savings
why were banks affected by the stock market crash
Why were banks affected by the stock market crash?
  • Depositors panicked and withdrew money – bank runs
  • Many banks lost money from stocks and also from loans made to stockbrokers