ECO 202 Final Project.pdf - 1 The 1950u2019s was...

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The 1950’s was considered the “booming” decade: booming economy, booming suburbs and the well-known baby boom.After WWII, there was a considerable increase in the population as veteran’s returning from war started having families. Approximately 4 million babies were born each year during this decade (History.com Staff, 2010).By the end of the 1950’s, the increase in birthrates added more than 50 million babies to the population. Companies who made and sold baby items saw profits sore due to unusual high demand. Baby food, furniture, and toys were being consumed at a rapid pace (History.com Staff, 2010).Government spending also added to the economic boom.Government money was used to invest in the Interstate Highway System, schools, and new technologies for the military. This gave people the opportunity to travel and take family road trips.This was deemed one of the largest public spending projects in the country’s history. The GI Bill of Rights contributed by providing war veterans with access to a college education, in turn adding highly-educated employees to the work force at a time American businesses were willing to pay high salaries for engineering and management skills (Shmoop Editorial Team, 2008).Another factor was the increase in consumer spending.People’s spending patterns were changing and so was the standard of living. The term ”buy now, pay later” became the new way for buying big ticket items such as cars and houses. By the end of the decade, middle-class families had 30% more 2
buying power than ever before. We will see just how much of an impact this boom has made on the GDP (Shmoop Editorial Team, 2008).2
This graph depicts continuous growth through out the decade, with the exception of the recessions in 1954 and 1958. Between 1950 and 1959, the GDP grew from $200 billion to more than $300 billion, respectively, by the end of the decade. Much of this increase came from government spending: The construction of interstate highways and schools, the distribution of veterans’ benefits and most of all the increase in military spending.These all added to the decade’s economic growth. The middle-class had more money to spend than ever before and more things to buy due to the difference types of consumer goods available (History.com Staff, 2010).The recession of 1954 was much milder than in 1958. The first recession of the ‘50’s (July 1953 -May 1954) was due to inflation that followed the Korean War. Most of the dollars went towards national security. The recession lasted for 10 months causing the GDP to decline 2.2% and unemployment was at it’s lowest since WWII at 2.9%. In comparison, the recession of 1958,deemed the Eisenhower Recession (August 1957 – April 1958), was a more serious one. Over an 8-month period, there was a huge impact on the unemployment rate, increasing it to 6.8% and GDP declining by 3.3%. Even though the government tightened monetary policy years prior to curb inflation, prices continued to rise through 1959. This recession along with the U.S. dollar, contributed to a foreign trade deficit. (Barufaldi, 2008).

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