The Great Depression was caused by _____ shocks, and the stagflation of the 1970s was caused by _____ shocks.
A) demand; demand
B) demand; supply
C) supply; demand
D) supply; supply

Question

Quizplus · Accepted Answer

The Great Depression was largely caused by supply shocks such as the stock market crash of 1929, bank failures, and a decrease in international trade. On the other hand, the stagflation of the 1970s was caused by supply shocks such as oil price increases and agricultural commodity shortages, leading to an increase in the cost of production and a decrease in aggregate supply. Therefore, the correct option is B, as the Great Depression was caused by supply shocks and the stagflation of the 1970s was caused by both supply and demand shocks.

The Great Depression Was Caused by _____ Shocks, and the Stagflation