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Figure: Fiscal Policy and the End of the Great Depression
-(Figure: Fiscal Policy and the End of the Great Depression) Look at the figure Fiscal Policy and the End of the Great Depression. The period from 1936 to 1938 would seem to indicate that in the short run a decrease in government deficit spending can _____ the unemployment rate.
A)reduce
B)increase
C)not affect
D)eliminate

Question

Use the following to answer questions :
Figure: Fiscal Policy and the End of the Great Depression 
-(Figure: Fiscal Policy and the End of the Great Depression) Look at the figure Fiscal Policy and the End of the Great Depression. The period from 1936 to 1938 would seem to indicate that in the short run a decrease in government deficit spending can _____ the unemployment rate.
A)reduce 
B)increase 
C)not affect 
D)eliminate

Quizplus · Accepted Answer

A decrease in government deficit spending typically leads to a reduction in aggregate demand, which can increase the unemployment rate in the short run.

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