What was most likely the cause of the Great Depression?
A) a fall in the domestic price level, leading to an increase in the demand for imports
B) a fall in resource prices, leading to an increase in aggregate supply
C) an increase in unemployment, leading to a decrease in aggregate demand
D) an increase in the domestic price level, leading to an increase in the demand for exports
E) Economists still debate the exact causes.

Question

Quizplus · Accepted Answer

The most widely accepted explanation for the Great Depression is that there was a decrease in aggregate demand, caused in part by a decline in consumer spending and investment, which led to a decrease in production and employment, exacerbating the economic downturn. This increase in unemployment resulted in a further decrease in consumer confidence and spending, creating a negative feedback loop. While there were other contributing factors, such as the stock market crash of 1929 and widespread bank failures, the decrease in aggregate demand is considered to be the primary cause of the Great Depression.

What Was Most Likely the Cause of the Great Depression