As a result of a sharp decrease in aggregate demand between 1929 and 1933, the unemployment rate changed from _____% in 1929 to _____% in 1933.
A) 0; 3
B) 3: 25
C) 40; 5
D) 25; 0

Question

Quizplus · Accepted Answer

The sharp decrease in aggregate demand led to a decrease in production, which resulted in layoffs, increasing unemployment. The unemployment rate went from 3% in 1929 to 25% in 1933. Option A is incorrect because the US economy had a natural level of unemployment, so it was not zero in 1929. Option C is incorrect because it exaggerates the actual unemployment rate in 1933, which was not as high as 40%. Option D is incorrect because it implies that the economy had recovered by 1933, which was not the case.

As a Result of a Sharp Decrease in Aggregate Demand