How was the economy of the North affected by the war?

The U.S. Civil War fundamentally changed America's economy, especially in the North.  By the end of the war, over one million men were in the Union army and navy.  These men had to be supplied and armed quickly and efficiently, and during the war contractors were able to make use of interchangeable parts, telegraph lines, and rail transportation in order to maximize profits while minimizing costs.  Most Union units by the end of the war...

The U.S. Civil War fundamentally changed America's economy, especially in the North.  By the end of the war, over one million men were in the Union army and navy.  These men had to be supplied and armed quickly and efficiently, and during the war contractors were able to make use of interchangeable parts, telegraph lines, and rail transportation in order to maximize profits while minimizing costs.  Most Union units by the end of the war were equipped with standardized rifles that could be made quickly and cheaply.  Contrast this with previous wars where armies needed gunsmiths for all minor repairs.  Before the war, Samuel Colt demonstrated that interchangeable parts could revolutionize the firearm industry.  After the war, industrialists used interchangeable parts to manufacture toys and farming implements in order to make goods more quickly and cheaper.  

The Union army won the war because it controlled the rail system in the country.  After the war, industrialists used railroads to ship raw materials and consumer goods throughout the country.  It was now possible to have a nationwide (and if one had steamships, a worldwide) client base and this in turn maximized profits and brought the country together as a cohesive economic unit, as it became possible to purchase the same goods in California as you could New York.  The rail system finally reached its economic potential with the completion of the Trans-Continental Railroad in 1869.  Other railroads would soon branch off this main line, thus creating more towns and economic opportunities for more Americans.  

The telegraph was also key to the Union victory, as the Union could synchronize its armies in the field by 1865--something the South never could accomplish.  After the war, capitalists could use those same telegraph lines to order more materials and to take orders from customers.  This brought the nation together, as the telegraph would soon lead to the telephone in 1876, thus creating more buying and selling opportunities for the rapidly growing nation.