Economic Growth

box factory  
Young women in a box factory
[audio] The Seven Factors of the Economy

  • The U.S. economy had difficult times after World War I because of two reasons:
    1.) They had to switch from making war products to consumer products.
    2.) Two million soldiers came home and needed to find jobs
  • Gross National Product is the total value of all products and services made in a specific country.
  • An increase in the Gross National Product means the economy is getting healthier.

Demand for Products

  • Productivity of Workers: amount a worker produces over a period of time
  • The increase in the number of workers and their wages also increases the demand of products because now there are more workers that can afford products.
  • Now that more people had electricity, the demand for electrical products such as vacuums and radios increased.
  • Companies tried to increase demand for products through advertisements.
  • People felt optimistic.
  • It's good for the economy when people feel optimistic about the future because they spend more money.

[audio]Money and Credit

  • The government made it easy for businesses to borrow money by offering loans with low interest rates.
  • Installment Plan: The consumer buys a product by paying a smaller portion of the whole price and then making payments until the item is paid off. Installment plans are beneficial for consumers because it allows them to purchase products without having to save up to pay for the full price.
  • Installment plans are also beneficial for the seller because they make money off the interest charged.


  • Membership in unions decreased in the 1920's due to improvements in working conditions and wages.


  • The prices of stocks increased in the 1920's because people were optimistic about businesses making money.
  • Oligopoly: a state in which a small group of companies make and sell almost all of the products in that market.
  • Business expanded in the 1920's by opening more stores to sell products, to repair products, and banks to help people buy products.
  • Congress helped people, especially rich people, keep more of their money by reducing income taxes.