The Rise and Fall of the American Economy in the 1920s
Lesson Plan Reference
Grade Level 9-12
Difficulty Level 2 (Reinforcing / Developing)
Type of Assignment Individual or Group
This activity will examine the economic culture of the 1920s. This context is fundamental to understanding the causes and effects of the Great Depression. Students will be able to identify and explain the many reasons for economic success that occurred following the first World War, and lasting through the 1920s. With a strong stock market, expanded employment, exploding industries, rising credit, and a technological boom, citizens in 1920s America experienced tremendous prosperity. However, this same prosperity would eventually become a major cause of America’s Great Depression.
1920s American Economy
Throughout the 1920s, America experienced tremendous technological advances. Refrigerators, washing machines, and the availability of electricity were just some of the major examples in newer products. Along with this, growths in medicine, transportation, and luxury aided the rise in consumer products.
Consumerism is the economic term to define individuals spending their income on goods and services, or consumption of products. For America, this was, and still is, the driving force behind our capitalist economy, as the consumer powers the market and businesses.
The Stock Market Boom
As businesses experienced more success, so did the stock market. Stock values soared to over $87 billion in 1929. Many became rich quick by investing their own new-found wealth in the market. However, the already wealthy prospered most from this boom, as big business corporations dominated the economic landscape.
Buying on Credit
As consumerism grew, so did Americans' desire for material goods. However, many new products were simply too expensive for most middle class citizens. A great surge in buying on credit resulted, as consumers could now pay back big purchases on installment plans. Soon, many Americans became entrenched in debt.
Rise in Productivity
To meet the massive need for products demanded by the American people, productivity rose greatly. Any and every industry, from cars to vacuums, began mass producing their products to meet this demand. From 1921 to 1929, the GNP, or Gross National Product (the total value of a country's production) rose 6% a year.
Many industries expanded greatly during the 1920s. With new technologies and high demand, many companies and businesses experienced tremendous growth. Inventive methods, like Henry Ford's assembly line to make cars, also aided this major spike in industrial growth. With this growth, employment also rose.
Have students identify the major economic factors of today’s markets. Students can identify and explain modern technological improvements, the nature of the stock market, improving and expanding industries, and employment figures. Students should grasp what America’s economy is like today and why it could both continue to boom, or eventually bust.