Reasons that the recession of 2008-2009 did not become a depression include: i. The Fed bailed out troubled financial institutions.
Ii. The government aggressively balanced its budget.
Iii. The government increased its expenditures, which increased aggregate demand.
A)i only
B)ii only
C)iii only
D)i and iii
E)i and ii

Question

Quizplus · Accepted Answer

The bailout of troubled financial institutions by the Fed helped maintain the stability of the financial system and prevented a collapse. The government's increase in expenditures helped boost aggregate demand and stimulate economic activity, preventing the recession from turning into a depression. However, the government did not aggressively balance its budget during this time and actually ran large deficits, which contributed to the increase in expenditures. Therefore, option B (ii only) is incorrect.

Reasons That the Recession of 2008-2009 Did Not Become a Depression