The manipulation of spending to influence aggregate demand was first put forward because:
A) the classical view of flexible prices and wages did not necessarily hold in reality.
B) unemployment often remained stubbornly high for too long during and after a
Depression.
C) inflation was extremely high during the Great Depression.
D) the classical view of flexible prices and wages did not necessarily hold in reality and unemployment often remained stubbornly high for too long during and after a
Depression.

Question

Quizplus · Accepted Answer

The classical view of flexible prices and wages did not necessarily hold in reality, as demonstrated by the Great Depression where unemployment remained stubbornly high for too long. This led to the proposal of manipulating spending to influence aggregate demand. Option A is partially correct in identifying this lack of flexibility but does not address the issue of persistent unemployment. Option B correctly identifies high unemployment but does not provide a reason for why spending should be manipulated. Option C discusses inflation, which is not directly related to the manipulation of spending to influence aggregate demand.

The Manipulation of Spending to Influence Aggregate Demand Was First