Research Paper: The Roaring Twenties After World War I, America had to demobilize and return to a peacetime economy. During the 1920s, it was considered a prosperous economy as there was a new workforce due to demobilization, new inventions, and new infrastructure. Morale was also high as America along with the Allied powers defeated Germany and the Great War was finally over. However, America began to make many policies and economic decisions that would eventually lead to the Great Depression. One economic policy was that “the Federal Reserve had raised interest rates in hopes of slowing the rapid rise in stock prices” (Romer, 3). At the time, “stock prices had more than quadrupled since their 1920 low” (3). Raising interest rates would slow the economy, but more specifically in the construction and auto sectors because they are “interest sensitive” (3). This would slow down work, especially in the construction of new infrastructures. Additionally there was a real estate boom in the early 1920s that led to a surplus of homes, causing home sales to decline. As a result, less construction was needed, resulting in a reduction in the workforce and a slowdown in the economy. Production would also decrease for the automotive industry because it is an interest-sensitive industry. Therefore, jobs have vanished in the two sectors causing the economy to stagnate. This was all due to the Federal Reserve raising interest rates which caused a chain reaction that would slow the economy into the Great Depression. Another policy adopted by the government was the creation of new infrastructure. The government was involved in the new infrastructure... middle of paper... contemporary European history. 9.2 (2000): 183-207. Falkus, M.E. “United States Economic Policy and the “Dollar Gap” of 1920.” Review of economic history. 24.4 (1971): 599-623. Klein, Maury. “The Stock Market Crash of 1929: A Review Article.” Review of company history. 75.2 (2001): 325-351. Metzer, Jacob. "How new was the new age? The public sector in the 1920s." Journal of economic history. 45.1 (1985): 119-126. Romer, Christina D. "Great Depression." Np, 12/20/2003. Network. May 31, 2010. .Kaplan, Edward. "The Fordney-McCumber Tariff of 1922." EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008. URL http://eh.net/encyclopedia/article/Kaplan.Fordney"The Roaring Twenties." Spiritus-Temporis.com. Np, nd Web. May 31 2010. .