income. The other 95 percent struggled, where only 15 to 20 percent were considered middle class. Sixty percent of the population was in poverty, which meant that they only pulled down a measly two thousand dollars a year. Numerous families were saving and investing rather than buying American goods. The supply was far greater than the demand thus caused prices of American goods to go out and most Americans could not afford the goods. Due to the false outlook, many industries overproduced some of these industries included textiles, farming and automobiles. These industries were looking for increased spending and investing.
             Short Signed policies by the government were also another problem and led to economic woes. Politicians believed business was the key to the business of America. High tariffs passed by congress protected American industries but would hurt farmers and international trade. President Calvin Coolidge would pass the Revenue Act in 1926, which gave a tax break to people with higher incomes. Another mistake made was that the Reserve banks created over $500 million in new money. With this came a new policy where Federal Reserve banks were allowed to lend out $4 billion dollars. This would pave the way for complete disaster.
             Coolidge pumped money into the economy in 1927 to help stimulate the economy this caused prices of real estate and stocks to skyrocket. Credit expansions and inflation would send false signals to businessmen because of the reduced interest rates. The businessmen thought that this would mean increase in capital savings. With this in mind, businesses increased production thus leaving large amounts of unsold items. As he pumped in more money to the economy, it caused prices to increase which, in the end, increased the costs of doing business. When you keep injecting money into the economy it leads to what we call a boom. This continued until 1928. It was economists' theory tha...