Question 1

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

Accepted Answer

When the government raised taxes, it decreased the disposable income of households, which means that they had less money to spend on goods and services. This reduced consumer spending, causing aggregate demand to decrease.

Question 2

During the Great Depression, aggregate demand decreased. This would have been caused by an)

Accepted Answer

A decrease in wealth would lead consumers to spend less money, leading to a decrease in aggregate demand. The other choices would generally have the opposite effect on aggregate demand.

Question 3

In regard to the macroeconomy, it is believed by classical economists that

Accepted Answer

Classical economists believe in the flexibility of prices, meaning that the market can self-correct and adjust to changes in supply and demand without the need for government intervention. This principle is known as the "invisible hand" and is a cornerstone of classical economic theory.

Question 4

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

Accepted Answer

A decrease in expected income led to less spending by consumers and businesses, which reduced aggregate demand.

Question 5

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate ________ and the price level ________.

Accepted Answer

When aggregate demand decreases, output and employment decrease, leading to an increase in the unemployment rate. At the same time, a decrease in aggregate demand leads to a decrease in the price level, as firms find it difficult to sell their output and are forced to reduce prices to clear their inventories.

Question 6

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate ________ and real gross domestic product (GDP) ________.

Accepted Answer

During the Great Depression, a decrease in aggregate demand caused firms to decrease production, which led to increased unemployment, hence decreased real gross domestic product (GDP).

Question 7

When describing how the economy works, classical economists claim that

Accepted Answer

Classical economists believe that savings is crucial to economic growth as it provides the funds necessary for investment, which leads to increased productivity and output in the long run.

Question 8

When the government pursued a "tight money" policy during the Great Depression, it caused aggregate demand to decrease because it

Accepted Answer

Pursuing a "tight money" policy involves increasing interest rates and reducing the money supply, which makes it harder for consumers and businesses to borrow money. This leads to a decrease in consumer spending and investment spending, which in turn reduces aggregate demand. The other choices are not relevant to the effects of a tight money policy on aggregate demand during the Great Depression.

Question 9

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

Accepted Answer

When people expect their future income to decrease, they are less likely to spend money on goods and services, which leads to a decrease in aggregate demand.

Question 10

When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because

Accepted Answer

When 9,000 banks failed during the Great Depression, it caused the money supply to decrease because the government didn't help the banks. This led to a decrease in aggregate demand because there was less money available for consumers and businesses to spend.

Question 11

Keynesian economists believe that

Accepted Answer

Keynesian economists believe that in the short run, fluctuations in aggregate demand play a crucial role in determining the level of economic activity and employment. They argue that the economy can remain stuck in a state of high unemployment and underutilized resources due to insufficient aggregate demand. Therefore, they suggest that government intervention is necessary to stimulate aggregate demand through fiscal policy measures such as increased government spending and tax cuts. In contrast, classical economists believe that the market tends towards equilibrium and that government intervention can be counterproductive.

Question 12

The primary cause of the Great Depression was a decrease in aggregate demand. Which of the following events would have caused such a decrease?

Accepted Answer

A large number of bank failures would have led to a decrease in the money supply and a decrease in consumer and investment spending, which would have caused a decrease in aggregate demand.

Question 13

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the price
level ________ and real gross domestic product (GDP) ________.

Accepted Answer

A decrease in aggregate demand leads to a decrease in both the price level and real GDP, as there is less demand for goods and services in the economy.

Question 14

Among the beliefs held by classical economists, one is that

Accepted Answer

The answer of Among the beliefs held by classical economists,...

Question 15

Which of the following would have caused aggregate demand to decrease during the Great Depression?

Accepted Answer

A decrease in the money supply would have caused a decrease in aggregate demand because people would have less money to spend, causing a decrease in consumer spending and investment. This was a factor in the Great Depression, as banks failed and the money supply contracted. Choices A, B, D, and E would have had the opposite effect, increasing aggregate demand.

Question 16

Classical economists believe that

Accepted Answer

Classical economists believe in the self-regulating nature of the economy and that it can adjust back to full employment without the need for government intervention. They emphasize the importance of long-term economic growth rather than short-term fluctuations. They view prices as flexible and able to adjust to changes in supply and demand. Therefore, they do not believe that the economy needs help in moving back to full employment.

Question 17

When considering how the economy works, classical economists hold that

Accepted Answer

Classical economists believe in the neutrality of money and that the economy tends towards full employment in the long run. Therefore, they prioritize the long run over the short run.

Question 18

Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause

Accepted Answer

A decrease in stock prices would cause a decrease in consumer and business confidence, leading to a decrease in aggregate demand.

Question 19

During the Great Depression, thousands of U.S. banks failed. As a result,

Accepted Answer

The failure of thousands of banks led to a decrease in consumer and business confidence, which decreased spending and investment. This decrease in spending and investment led to a decrease in aggregate demand.

Question 20

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

Accepted Answer

When stock prices declined during the Great Depression, households' wealth decreased due to their investments in the stock market. This decrease in wealth led to a decline in consumer spending because households had less money to spend. As a result, aggregate demand decreased.

Quiz 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

During the Great Depression, aggregate demand decreased. This would have been caused by an)

In regard to the macroeconomy, it is believed by classical economists that

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate and the price level .

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate and real gross domestic product (GDP) .

When describing how the economy works, classical economists claim that

When the government pursued a "tight money" policy during the Great Depression, it caused aggregate demand to decrease because it

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because

Keynesian economists believe that

The primary cause of the Great Depression was a decrease in aggregate demand. Which of the following events would have caused such a decrease?

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the price level and real gross domestic product (GDP) .

Among the beliefs held by classical economists, one is that

Which of the following would have caused aggregate demand to decrease during the Great Depression?

Classical economists believe that

When considering how the economy works, classical economists hold that

Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause

During the Great Depression, thousands of U.S. banks failed. As a result,

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

Quiz 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

During the Great Depression, aggregate demand decreased. This would have been caused by an)

In regard to the macroeconomy, it is believed by classical economists that

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate ________ and the price level ________.

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate ________ and real gross domestic product (GDP) ________.

When describing how the economy works, classical economists claim that

When the government pursued a "tight money" policy during the Great Depression, it caused aggregate demand to decrease because it

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because

Keynesian economists believe that

The primary cause of the Great Depression was a decrease in aggregate demand. Which of the following events would have caused such a decrease?

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the price level ________ and real gross domestic product (GDP) ________.

Among the beliefs held by classical economists, one is that

Which of the following would have caused aggregate demand to decrease during the Great Depression?

Classical economists believe that

When considering how the economy works, classical economists hold that

Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause

During the Great Depression, thousands of U.S. banks failed. As a result,

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate and the price level .

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate and real gross domestic product (GDP) .

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the price level and real gross domestic product (GDP) .