Use the following graph to answer the following questions.This graph depicts an economy where aggregate demand has decreased,with no change in either short-run aggregate supply (SRAS)or long-run aggregate supply (LRAS).

-During the Great Depression,the aggregate price level and real gross domestic product (GDP)both decreased,as depicted in the graph.Unemployment increased to record levels.Which of the following best explains why this happened?

Question

Use the following graph to answer the following questions.This graph depicts an economy where aggregate demand has decreased,with no change in either short-run aggregate supply (SRAS)or long-run aggregate supply (LRAS).
 
-During the Great Depression,the aggregate price level and real gross domestic product (GDP)both decreased,as depicted in the graph.Unemployment increased to record levels.Which of the following best explains why this happened?

Quizplus · Accepted Answer

The graph shows a decrease in aggregate demand, which indicates a decrease in consumer and business spending. This could have been caused by a variety of factors, but choice B provides a list of factors that are historically associated with the Great Depression. The stock market crash of 1929 and the resulting large numbers of bank failures led to a decrease in the money supply, which contributed to the recession. The increase in tax rates also reduced consumer spending. The decline in real GDP led to a rise in unemployment, which reached record levels during the Great Depression.

Use the Following Graph to Answer the Following Questions