Question

Recognize the cause-and-effect relationships of economic trends as they relate to society in the United States during the 1920s and 1930s.

Answer 1

Context: The US economy was in a boom after World War I, the domestic market was hot, and Europe was demanding manufactured goods.

Causes: In order to make more money, companies have created an overproduction of goods and services. To do this, they sought credit from the banks - which expanded their credit portfolios in a wild way. However, Europe has recovered economically and drastically reduced demand for American products.

Consequence: Domestic demand was not sufficient for the outflow of products. Inventories increased considerably, the businessmen lost the conditions to pay their loans to the banks and the financial system collapsed. Unemployment rose and the economy went into recession.

Answer 2

The United States embraced a laissez-faire policy in the economy during the 1920s. The Secretary of Treasury, Mellon, tremendously reduced taxes, which moved the economy because there was more money to spend. Inventions such as cars and radios, as well as the conservative economic policies, added to a huge economic boom. Many of the economic procedures in the decade would lead to danger especially in the stock market, which would lead to the crash and the Great Depression.