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The increasing popularity of the automobile contributed to economic growth both directly and indirectly in the 1920s.
During the 1920s, people bought large numbers of cars as cars become more affordable. The link below tells us, for example, that Americans bought 4.2 million automobiles in 1926. This contributed to economic growth simply by giving jobs to all the people who made the cars.
Indirectly, the growth in automobile use led to the rise of related industries. Oil companies made money making gasoline for the cars. Service stations arose to gas the cars up and to service them. Highways were being built by local governments and motels sprang up along roads. All of these activities that were tied to automobile use helped to drive economic growth as well.
The automobile had a huge impact on the economy in many ways. To begin with, Ford needed workers for his new production method, the assembly line. To entice workers, he paid more than twice the normal hourly wage other workers were getting at the time. This alone pushed more money into the economy and the impact grew from there.
Car ownership grew at a fast pace in the U.S. and by the 1920s, 8 million cars were registered in the country with that number nearly tripling to 23 million by the end of the decade.
The huge numbers of people owning cars impacted many other industries. Car tire companies needed tires from the factories which meant the factories needed more rubber created. Road and highway construction across the country exploded which employed many other people. Travelers on the roads needed gas, motels and restaurants and this too impacted the economy.
Along with the number of cars on the road, the economy changed because people were no longer tied to a geographical area for work or for shopping. More people were able to work, travel and shop in more areas because of the development of the automobile industry. This also contributed to economic growth across the nation.
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