According to Milton Friedman and Anna Schwartz, the loss of output during the early 1930s in the United States was due to
A)high tax rates imposed by the federal government.
B)the Fed's increasing of the required reserve ratio.
C)the stock market crash of 1929.
D)a wave of bank failures.

Question

Quizplus · Accepted Answer

Milton Friedman and Anna Schwartz argued that the primary cause of the Great Depression in the United States was the widespread bank failures that occurred during the early 1930s. As banks failed, the money supply contracted, leading to a reduction in aggregate demand and a fall in output. This view is supported by evidence that shows a sharp decline in the money supply during this period, as well as the fact that output began to recover once the banking system stabilized.

According to Milton Friedman and Anna Schwartz, the Loss of Output