1. The Economy in the Late 1920s
Chapter 21 Section 3
The Economy in the Late 1920s

2. How did a decade of Republican government affected the economy?
Republican laissez-faire policies caused rapid business expansion, opening up new opportunities for competitors to the giant monopolies
The automobile, steel, oil, and electrical industries boomed as did publishing, movie, and machine making industries

3. Welfare Capitalism
Employers raised wages and provided benefits like paid vacations, health plans, recreation programs, and English classes for immigrants
Strengthened company loyalty and worker morale

4. Evaluate welfare capitalism from the point of view of a factory worker, a labor union leader, and a factory owner.

5. Factory Worker
Support, due to increased wages and benefits

6. Labor Union Leader
Oppose, as it would mean a decrease in union membership

7. A Factory Owner Mixed Had to offer employees more money and benefits
But avoided strokes and could thereby maintain increased productivity

8. What reasons did corporations have for practicing welfare capitalism in the 1920s?
They hoped to meet workers’ demands while avoiding union intervention, preventing strikes, and keeping productivity high

9. Looking at the circle graph on page 732, what percentage of American families were earning less than $2,000a year in 1929?
65%
Note- $2,000 in 1929 is worth $26, today
Poverty line in 2013 for a family of 4 is $23,021

10. How do you think a widespread increase in personal debt could affect a nation’s economy?
If people are earning less, people are less able to pay back their loans
This would then result in lenders being able to give out less money
Could also result in people buying less, resulting in businesses being less successful
May lead to workers losing their jobs

11. Speculation
The practice of making high risk investments in hope of getting a huge return

12. Why was speculation in the stock market so popular in the 1920s?
The optimism of the age
The prevalence of a “get rich quick” mentality
The rise in stock values

13. Buying on Margin
This allowed investors to purchase a stock for only a fraction of its price and borrow the rest
As long as stock go up, everything is fine
If stocks drop…there’s problems

14. How does a stockbroker profit from an investor buying on margin?
The brokers charge high interest rates and could demand payment of the loan at any time

15. What issues faced farm and factory workers in the late 1920s?
Falling farm prices left farmers unable to repay their debts, facing the loss of their farms
Factory workers faced long hours for low wages and in poor conditions