The multiplier effect refers to an increase in final income due to an injection in spending. When the circular flow has an injection of new demand, there is likely to be a multiplier effect. This is because extra income leads to more spending hence more income. Which means that the more one person spends, another person gains more income.
The economic growth in the U.S in 1920's was impressive. There was a widespread throughout the population of ownership of household appliances, cars, and housing. For many Americans on the middle-class, it was a decade of unprecedented prosperity. There was mass production of automobiles and were sold at low cost. Also, Gasoline was at a low cost. Goods could easily be transported, and automobiles made it easy for Americas to travel. There was more disposable income for entertainment and leisure due to increased earnings from the different industries. The booming popularity of entertainment like sports and movies, radio programs and innovations in technology coincide with the new wealth. With the increased financial prosperity Americans had more income to spend on themselves. There was more money to spend on leisure activities. Movies and sports became very popular, and magazines and radio turned artists, athletes, and actors to icons. In major cities there sprang up movie palaces which could hold thousands of people. For as little as 25 cents, Americans could loosen themselves, be part of another world, and forget their problems. Movie attendance swelled to 90 million by the end of the decade. Radios also became a common feature, and many stations developed. Most of the stations were focused on broadcasted news political speeches and radio stories. Entertainment intercepted advertisement space. Radio programs like 'Amos n Andy' which began in late 1920's entertained listeners around the country. This had the effect of smoothing out dialect, language, and taste in music. Radio introduced play-by -play-making sports popular. Radio also popularized sports figures and what their accomplishments were. All the entertainment scenes, sports, radio, advertisement, and movies created income for the different people who were involved which also influenced spending. In theatres, also those in production and owning movie places made their income through different ways.
The GNP growth in the 1920's was rapid, and it shows a 4.2 percent each year from 1920 to 1929. By the standards of the nineteenth and twentieth century, these standards were relatively rapid. During this growth, there were interruptions like the 1920-1921 great depression which lasted for a year. Processes and new products drove the economic growth in the 1920's-1930. This was coupled with the use of electricity in the production of goods coupled with a rise in labor and productivity per capita. The moving assembly line also influenced the growth in manufacturing combined with other factors to increase productivity. New services and products created new markets as well as labor for the manufacturers. Hence more people were employed and an increase in income hence more spending in the population. There were new markets for laborsaving electronic items, electric irons, vacuum cleaners, electric iceboxes and electric lighting. Such electric utilities were distributed with electricity. The electric market fed a rapid expansion in the stock market just like the internet boom in the 1990's. To sum up, in the years after World war 1, America was changed by new technologies. Millions improved their lives bringing changes to the American society
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