This film is an early musical, one of the first that fully exploited the possibilities opened up by the invention of sound film. Consider what the film does that a stage musical could not. Think particularly about the spectacular production numbers at the end of the film, choreographed and directed by Busby Berkeley, who became famous for his extravagant (and often sexually suggestive) musical pieces in films for Warner Brothers in the 1930s, and (less daringly) for MGM from 1939 onward.
Remember that this film appeared at the height of the Depression. Note how the film both refers to the hard times most of its audience was then experiencing, and proposes escapist fantasy as an antidote. Consider how the 'backstage musical' structure allows for this double movement. The songs are all naturalistically motivated as being part of the musical that the characters are putting on; at the same time, the romance between Peggy and Billy gets transfigured by being translated into the production numbers enacted within the musical by their characters. Two of the big production numbers ("Shuffle Off to Buffalo" and "I'm Young and Healthy") show Berkeley at his most surreal; while the third one ("Forty-Second Street") creates a strange replica of the clash of cultures and classes in the big city.