Research Paper: Roaring Twenties

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Research Paper: Roaring Twenties

After World War 1, America had to demobilize and revert back to a peace time economy. During the 1920’s, it was viewed as a prosperous economy since there was a new labor force due to demobilization, new inventions, and a new infrastructure. Also moral spirits were high since America along with the Allied Powers defeated Germany and the Great War was finally over. However, America began making many economic policies and decisions that will eventually lead up to the Great Depression.

One economic policy was that “the Federal Reserve had raised interest rates in hopes of slowing the rapid rise in stock prices” (Romer, 3). At the time the “stock prices had risen more than fourfold from the low of 1920” (3). With the raised interest rates, this would slow down the economy, but more specifically in the construction and automobile areas because they are “interest sensitive” (3). This would slow down the constructions especially in the construction of the new infrastructure. Also there was a boom in housing in the early 1920’s that led to a surplus of houses, causing the housing sales to decrease. With this, less construction was needed, therefore shrinking the labor force and slowing down the economy. Production would also decrease for the automobile industry because it was an interest sensitive industry. Therefore, jobs vanished from the two industries causing the economy to stagnate. All of this was because of the raised interest rates from the Federal Reserve causing a chain reaction that would slow down the economy leading it into the Great Depression.

Another policy that the government incorporated was the creation of a new infrastructure. The government became involved with the new infrast...

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