Regarding the theoretical operation of the Pigou,expectations,and redistribution effects,does the U.S.experience between 1929 and 1933 provide any evidence?
A)Since the price level did not fall,no evidence is provided.
B)Only the Pigou effect appears to have operated.
C)The Pigou effect appears to have overwhelmed the other effects.
D)All three effects appear to have helped cushion the fall in output.
E)The expectations and redistribution effects appear to have overwhelmed the Pigou effect.

Question

Quizplus · Accepted Answer

The U.S. experience between 1929 and 1933 suggests that the expectations and redistribution effects overwhelmed the Pigou effect. The price level fell sharply during this period, which would have normally triggered the Pigou effect, but it was apparently overshadowed by the negative expectations of investors and the massive redistributions of income that occurred.

Regarding the Theoretical Operation of the Pigou,expectations,and Redistribution Effects,does the U.S.experience