Which of the following would have caused aggregate demand to decrease during the Great Depression?
A) a decrease in tax rates
B) an increase in international trade
C) a decrease in the money supply
D) an increase in the labor supply
E) an increase in consumer sentiment

Question

Quizplus · Accepted Answer

A decrease in the money supply would cause a decrease in aggregate demand by reducing the funds available for spending and investment. This was actually one of the factors that contributed to the severity of the Great Depression as the Federal Reserve failed to provide enough liquidity to the banks and the public. Choices A, B, D, and E would have either had no significant effect on aggregate demand during the Great Depression or could potentially have increased it.

Which of the Following Would Have Caused Aggregate Demand to Decrease