When consumer demand increases, as it did in the 1950s, after World War II, production rises. With expanding production, the need for more workers means manufacturing wages rise. At the same time, increasing production leads manufacturers to want to make even more profits. They need to expand, building more factories, warehouses, and distribution facilities, and they need to invest in more labor and raw materials. They have an insatiable demand for capital. With optimism high, banks are willing to finance a growing stream of loans, which go into, among other things, wages for the workers who construct the new plant and build the new equipment. In general, wages for both construction and production workers boom. This newly affluent middle class of workers satisfies its desire for the "good life" by spending ever more on cars, appliances, clothing, and electronics.

QUESTIONS

1. Write a brief synopsis of the story.

2. Identify the story's key variables. (list seven.)

3. Graph these variables' behavior over time.

4. Draw the causal loop diagram. (Hint: The diagram contains two loops of the same type.)