The laissez-faire approach that was popular before the Great Depression influenced the U.S. government to see business downturns as _____
A) natural phases in an otherwise healthy system and to therefore take short-term deficit spending measures to help recovery.
B) natural phases in an otherwise healthy system and to therefore wait for recovery to occur naturally.
C) serious maladies in an otherwise healthy system and to therefore work to redesign the system to avoid such failures in the future.
D) failures of the type of system that Adam Smith envisaged and to therefore work to move toward an open economy with free trade.
E) failures of the system to achieve the form that Adam Smith envisaged and to therefore work to decrease government interference at the micro level.

Question

Quizplus · Accepted Answer

The laissez-faire approach promoted a hands-off approach to the economy, believing that free markets would naturally correct themselves. Therefore, the government would wait for the economy to recover on its own during downturns, as seen in choice B. This approach was widely criticized following the Great Depression for its failure to address the serious maladies of the economy.

The Laissez-Faire Approach That Was Popular Before the Great Depression