When U.S. housing prices declined prior to and during the Great Recession, it caused aggregate demand to decrease because: household wealth decreased, causing a decline in consumer spending. In what ways was the Great Depression similar to and different from earlier and ... troubles of the US prior to the GD. It is estimated that unemployment hit 24.9% during the Great Depression. The British economist John Maynard Keynes developed this theory in the 1930s. Classical economists believe that the economy is stable and tends toward full employment because: prices are flexible and allow the economy to quickly return to full employment. Keynesian economists believe that more focus should be placed on aggregate demand than aggregate supply because: governments can promote full employment by stimulating aggregate demand. Which of the following could have caused the change in real GDP from year 0 to year 2 during the Great Recession? The Great Depression was a period of time when the world economy plunged to its deepest and brought the country to a virtual stand still. What started as Black Tuesday on October 29, 1929, only culminated prior … During the Great Recession, ___________ caused aggregate demand to decrease. One difference between the Great Recession and the Great Depression is that: the U.S. government reduced taxes during the Great Recession but raised them during the Great Depression. Donate or volunteer today! A decline in U.S. wealth would tend to cause: During the Great Recession, consumer sentiment in the United States declined, leading to a decrease in consumer spending. When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because: household disposable income decreased, causing consumer spending to decrease. This would tend to cause. Wisconsin pioneered in enacting an unemployment insurance law in 1932. President Franklin D. Roosevelt used Keynesian economics to build his famous New Deal program. Perfect prep for The Great Depression (1920–1940) quizzes and tests you might have in school. a. supply-side economics. Thus, on the eve of the Great Depression of the 1930's, a larger proportion of the American people were dependent on cash wages for their support than ever before. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. Although it originated in the United States, the tremors could be felt across the globe. Now, you might say that the incomplete recovery shows that “pump-priming”, […] These changes occur because of _____________, When the U.S. aggregate demand curve shifted to the left during the Great Depression, Which of the following economic statements would a Keynesian economist tend to support II, The short run deserves more attention than the long run, Classical economists focus on the ___________, while Keynesian economists focus on the ____________, One similarity between the Great Recession and the Great Depression is that, in both episodes, there were significant problems in financial markets, Which of the following policy statements would a classical economist tend to support, The government should allow the economy to adjust to changes in aggregate demand on its own, without interference, During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because II, The Great Recession was similar to other recessions since World War II in that, real gross domestic product (GDP) initially declined and then recovered sometime later, Classical economists believe that all prices are adjustable, therefore, in a recession the lack of aggregate demand would result in all prices decreasing (including inputs like wages) which would then increase aggregate supply. One similarity between the Great Depression and the Great Recession is that in both cases: there was noticeable stress in financial markets. The Classical School and the Great Depression. Which of the following statements is consistent with what happened during the Great Recession? Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because: prices are sticky and prevent the economy from adjusting to full employment. The government should allow the economy to adjust to changes in aggregate demand on its own, without interference. Which of the following events would have caused such a decrease? During the Great Depression, aggregate demand in the U.S. economy decreased. Khan Academy is a 501(c)(3) nonprofit organization. The Classical Model. Virtually full employment was achieved during World War II. a decrease in stock prices and a decrease in housing prices, A decrease in U.S. housing prices would tend to cause. The Depression and subsequent recessions resulted largely from economic factors, such as the 2007-2008 Great Recession, which was triggered by … According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore: long-run aggregate supply is the primary source of economic growth. The need for pensions prompted the Townsend Plan, which emerged in 1933 and quickly won large public support. The Great Depression is characterized by a decrease in aggregate demand. Which school of thought will most likely support the administration's policy prescriptions? there was a severe decline in stock prices. Classical economists focus on the ___________, while Keynesian economists focus on the ____________. the economy can adjust back to full employment on its own. According to classical economics, a decrease in aggregate demand causes the price level to _____________ in the long run. Between years 8 and 9 of the Great Depression, unemployment ____. The Great Depression of the 1930s worsened the already bleak economic situation of African Americans. After the stock market crash of 1929 , those entry-level, low-paying jobs either disappeared or … Which of the following factors caused this decrease in consumer sentiment? The second purpose arose as a reaction to the great depression. Which of the following best summarizes the main causes of the Great Recession? During the 1930s, America went through one of its greatest challenges: the Great Depression.President Franklin D. Roosevelt attempted to relieve the … My little spat with with Rauchway regarding unemployment during the Great Depression draws in Paul Krugman. Identify the series from the graphs given below, Series A: Great Recession real GDP; Series B: Great Depression real GDP; Series C: Great Recession unemployment rate; Series D: Great Depression unemployment rate. In how many of the years after the onset of the Great Depression did the United States experience cyclical unemployment greater than 10% (Hint: only look at the rate at the beginning of each year), According to classical economics, a decrease in aggregate demand causes the price level to _____________ in the long run. the U.S. government decreased the supply of money. Classical economists believe that all prices are adjustable, therefore, in an inflationary period the increased aggregate demand would result in all prices increasing (including inputs like wages) which would then decrease aggregate supply. Which pair of factors contributed to this decline in wealth? According to Keynesian economists, this is a result likely from a change in aggregate ____. Site Navigation. Identify whether the following statement is more likely to come from a classical economist or a Keynesian economist. The Classical Model was popular before the Great Depression. As a result, the price level _________ and real gross domestic product (GDP) _________. Causes of the Great Depression. When held up against other economic downturns, the Great Depression: During the Great Depression, thousands of U.S. banks failed. Reason Class view the full answer Previous question Next question During the Great Recession, the unemployment rate climbed as high as _________ and remained around 8% _________ months after the recession began. Which of the following led to the Great Recession? 11/08/2015 ° Prior to the great depression, the purpose of the federal budget was to finance the activities of the federal government. Graph ____ depicts the conditions of the Great Recession, and graph _____ depicts the conditions of the Great Depression. About. In October, 1929, the bubble burst, and in less than a week, the market dropped by almost half of its recent record highs. During the Great Depression, a major financial crisis followed the collapse of the stock market, which led to: The Great Recession began in __________ and lasted for __________. __________ would have caused such a decrease. The two key movements were for unemployment insurance and old-age pensions. During the Great Recession, __________ caused long-run aggregate supply to decrease. These changes occur because of _____________. B - Real GDP returned to its pre-recession level faster during the Great Depression than during the Great Recession. The President's Emergency Committee for Employment (later renamed the President's Organization for Unemployment Relief) was established in October 1930 to coordinate the efforts of local welfare agencies. Which of the following economic statements would a classical economist tend to support? When stock prices declined during the Great Recession, it caused aggregate demand to decrease because: household wealth decreased, leading to a decline in consumer spending. Billion… During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because: If a classical economist were asked which factor is most important to ensuring economic growth, how might he respond? Classical economists believe that savings is crucial for economic growth because: savings leads to investment spending, which increases output. When considering how the economy works, classical economists hold that: the long run is more significant than the short run. In regard to describing how the economy functions, Keynesian economists claim that: When U.S. aggregate demand and long-run aggregate supply decreased during the Great Recession: real gross domestic product (GDP) also decreased. A decrease in U.S. housing prices would tend to cause: Assume that the natural rate of unemployment is 5%. d. mercantilism. Although AFL membership fell to fewer than 3 million amidst large-scale unemployment, widespread economic hardship created sympathy for working people. b. In Ju… When describing how the economy works, classical economists claim that: What is the difference between unemployment rates during the Great Depression and the Great Recession at their peaks? Test your knowledge on all of The Great Depression (1920–1940). The New Deal. One of the reasons why the Great Depression was so severe is that: When the U.S. aggregate demand curve shifted to the left during the Great Depression: Savings is crucial to economic growth because it leads to investment in productive capital. Our mission is to provide a free, world-class education to anyone, anywhere. This spike in unemployment was caused by the large decrease in aggregate demand. One similarity between the Great Recession and the Great Depression is that, in both episodes: there were significant problems in financial markets. During the Great Recession, aggregate demand ________ and long-run aggregate supply ________. Of the following factors, which would have caused aggregate demand to decrease? When the government pursued a "tight money" policy during the Great Depression, it caused aggregate demand to decrease because: it reduced consumer spending and investment spending. The Great Recession is characterized by a decrease in aggregate demand. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. How many months did the Great Recession last? The primary cause of the Great Depression was a decrease in aggregate demand. c. classical economics. By the end of the First World War, a primarily agrarian American society had become a primarily urban, industrialized one. the economy needs help in moving back to full employment. The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment, in the long run, is classical economics. If real GDP was $977 billion at the start of the Great Depression and $13.16 trillion at the start of the Great Recession, then real GDP was _______ in year 7 of the Great Depression and _______ in year 4 of the Great Recession. The Great Recession lasted from _________ to _________. When financial markets went into a crisis during the Great Recession, it caused long-run aggregate supply to decrease because: there were new regulations limiting the amount of loans that could be made. Prior to the Great Depression, African Americans worked primarily in unskilled jobs. During the Great Recession, the U.S. ________ curve shifted to the ________. Note that E1 and E2, respectively, are the initial and final equilibrium points before and after the wealth decrease. FDR and the Great Depression . Oh no! popularly accepted theory prior to the Great Depression of the 1930s; says the economy will automatically adjust to full employment Keynesian Economics based on the work of John Maynard Keynes (1883-1946) who focused on the role of aggregate spending in determining the level of macroeconomic activity During the Great Recession, long-run aggregate supply decreased. b. Keynesian economics. Which of the following are supported by Keynesian economics? To ensure the best experience, please update your browser. The collapse of housing prices led to decreased wealth and significant problems in financial markets, as well as a decrease in expected income and a stock market collapse. c. C - Both the Great Depression and the Great Recession resulted from a permanent breakdown of the loanable funds market. Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that: the economy is not self-correcting and can become stuck below full employment. If prompted to describe fundamental beliefs about the economy, a Keynesian economist would state that: more focus should be placed on the short run than the long run. initiate an infrastructure program designed to build bridges. The Great Depression energized the impulse for social insurance. An institutional breakdown in U.S. financial markets would tend to cause: If you were to ask a Keynesian economist for his perspective on economic stability, what might he say? One factor would be: Classical economists believe that prices are completely flexible, from which they conclude that: the economy is self-correcting in response to shocks. During the 2008-9 Great Recession, the Obama administration proposed several stimulus packages with an aim to recover the economy from the economic crisis. During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because: Classical economists believe that savings is ____________, while Keynesian economists believe that savings is ____________. During the Great Recession, there was a financial crisis, a stock market crash, and a collapse in housing prices, all of which: contributed to a very long and deep recession. The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment is. Which of the following best summarizes the main causes of the Great Depression? A - Unemployment rates were higher during the Great Depression than during the Great Recession. The Great Depression in the United States began as an ordinary recession in the summer of 1929, but became increasingly worse … Krugman doesn’t respond to any of my arguments but he does give us the old line that fiscal policy didn’t fail during the Great Depression it wasn’t tried. Consider these four graphs. Which of the following economic statements would a Keynesian economist tend to support? The short run deserves more attention than the long run. The market tends to stability and full employment. The Great Depression was a difficult, life-altering period in the United States when millions of people struggled to find work and get by. During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because:. Classical economists believe that all prices are adjustable, therefore, in a recession the lack of aggregate demand would result in all prices decreasing (including inputs like wages) which would then increase aggregate supply. Causes of the Great Depression the 1920’s was period of grate happiness among the people of all kind, but it was not until the end of this decade that the financial had been noticed. The Great Depression lasted longer and was deeper than the average recession, in part, because: the government raised taxes and did not allow the money supply to increase. The Great Depression initially led to a sharp drop in union membership, but when economy began to recover in 1933, so did union membership. A Keynesian economist would have recommended which of the following in year 1 of the Great Depression and the Great Recession? popularly accepted theory prior to the Great Depression of the 1930s; says the economy will automatically adjust to full employment, based on the work of John Maynard Keynes (1883-1946) who focused on the role of aggregate spending in determining the level of macroeconomic activity, occurs when the amount of total planned spending on new goods and services equals total output in the economy, stocks of goods on hand; can be intentional or unintentional, occurs when an economy experiences high rates of both inflation and unemployment, a return to the basic classical premise that free markets automatically stabilize themselves and that government intervention is not advisable, the interest rate moves with changes in overall prices; there is an inverse relationship between the interest rate and the amount people borrow and spend, in order to maintain the same amount of accumulated wealth, people spend less when prices rise and more when prices fall, there is a direct relationship between changes in overall prices in an economy and spending on imports that diverts spending from domestically produces output, over the long run, unemployment will tend toward its natural rate, and policies to reduce unemployment below that level will be ineffective, households and businesses base their expectations of the future on past and current experiences, households and businesses base their expectations of future policies on how they think that will be affected by those policies, builds on the Keynesian view that the economy does not automatically return to full employment; emphasizes downward sticky prices and individual decision making in the micreconomy, school of thought that favors stabilizing the economy through controlling the money supply, persons who favor the economic policies of monetarism, policies to achieve macroeconomic goals by stimulating the supply side of the market; popular in the 1980s, curve showing the relationship between an economy's unemployment and inflation rates, an economy where foreign influences have no effect on output, employment, and prices, an economy when foreign influences have an effect on output, employment, and prices. The New Deal. To see why, we must go back to the classical tradition of macroeconomics that dominated the economics profession when the Depression began. Which of the following policy statements would a Keynesian economist tend to support? Keynesian economists believe that government intervention in the economy is necessary because: prices are sticky and prevent the economy from moving toward full employment. During the presidential campaign of 1932, Franklin Roosevelt criticized the deficits under Hoover, and on taking office in March 1933 he moved to cut federal spending, including veterans' benefits. This was caused by __________. Practice: The Great Depression. The Great Depression had defied all prior attempts to end it. Employment dropped by 20.5 million, more than 10 times the previous largest monthly decrease of … It looks like your browser needs an update. Keynesian economists believe that savings is a drain on demand because: when a recession occurs, households tend to spend less, which only worsens the recession. The Great Depression came as a shock to what was then the conventional wisdom of economics. b. lower wages that would increase the quantity of labor demanded and reduce unemployment. Classical economists believe that when aggregate demand changes, the economy remains at full employment because: Prior to the Great Depression, U.S. stock prices decreased dramatically. Which of the following were common to the Great Depression and the Great Recession? The Great Depression had _________ when compared to the average recession. As a result, the unemployment rate _________ and the price level _________, During the Great Depression, aggregate demand decreased. He also suspended the convertibility of dollars into gold; private individuals were required to turn in all their gold coins. Later a place called the stock market crash of 1929 came as a shock to most Americans and especially the bankers, that looking at the causes of the Great Depression; it was clear how America entered this … Keynesian economists believe that prices are sticky and do not adjust quickly, from which they concluded that: government intervention is sometimes necessary to promote full employment. This would have been caused by, When contrasted with other recessions, the Great Depression, If prompted to describe fundamental beliefs about the economy, a Keynesian economist would state that, According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore, long-run aggregate supply is the primary source of economic growth, If real GDP was $977 billion in 1929, by how much did real GDP decrease at the peak of the Great Depression, During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because, During the Great Recession, there was a financial crisis, a stock market crash, and a collapse in housing prices, all of which, contributed to a very long and deep recession, During the Great Recession, the U.S. ________ curve shifted to the ________. If asked about the basic functioning of the economy, a classical economist would claim that: the market tends toward stability and full employment. News; In some towns, local newspapers published the names of welfare recipients. As a result, Keynesian economists focus on _____________ changes and aggregate ____________. FDR strongly favored labor unions and they became a major component of his New Deal coalition, an alliance of interest groups that supported the New Deal and voted for Democratic presidential candidates. Which of the following graphs depicts classical economics long run correction of inflation? A stock market crash led to a decrease in expected income and tight monetary policy. Next lesson. Classical economists believe that government intervention in the economy is unnecessary because: prices are flexible and, therefore, the economy will adjust back to full employment on its own. Consider these four graphs. When Herbert Hoover became President in 1929, the stock market was climbing to unprecedented levels, and some investors were taking advantage of low interest rates to buy stocks on credit, pushing prices even higher. A stock market crash in __________ is generally viewed as the beginning of the Great Depression. The unemployment rate rose sharply during the Great Depression and reached its peak at the moment Franklin D. Roosevelt took office. Roosevelt ordered all the banks to close and be examined, so the sound ones could be reopened. As a result: During the Great Recession, U.S. household wealth declined, leading to a decrease in aggregate demand. Depression and Anxiety . When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because: the government didn't help the banks, causing the money supply to decrease. If real GDP was $977 billion in 1929, by how much did real GDP decrease at the peak of the Great Depression? Higher tax rates and a banking crisis then drove the economy into a depression. Which of the following graphs depicts classical economics long run correction of a recession? b. Keynesian … Keynesian economists believe that prolonged recessions are possible because: prices are sticky and do not adjust quickly during economic downturns. World War II. Based on the belief that prices are very flexible, classical economists conclude that: government intervention in the economy is unnecessary. The "second wave" of the Great Depression began in _________ and lasted for _________. The back-to-back recessions that began in 1929 and ended in 1938 are collectively known as: During the Great Recession, a major financial crisis followed the collapse of housing prices, which led to: the decline in the health of many large financial firms and banks. If you asked a classical economist which economic time frame she prioritized, how might she respond? What is the difference between unemployment rates during the Great Depression and the Great Recession at their peaks, One of the reasons why the Great Depression was so severe is that, Which of the following economic statements would a Keynesian economist tend to support, Which of the following led to the Great Depression, After year 2 of the Great Recession, the United States began to experience _______ in real GDP and _______ in the unemployment rate. How many years passed before the United States reached its lowest real GDP level during the Great Depression? If a Keynesian economist were asked to make a statement about the relationship between the government and the economy, what might she say? The government should intervene in the economy to promote full employment. Macro Ch11&12 study guide by ecmoraitis includes 23 questions covering vocabulary, terms and more. Identify which of the following graphs will be drawn by classical and Keynesian economists, respectively, for an economy experiencing a decrease in wealth. This would have been caused by: Which of the following led to the Great Depression? At the depths of the Depression, about one-third of the American workforce was unemployed, a staggering figure for a country that, in the decade before, had enjoyed full employment. The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment in the long run is. After year 2 of the Great Recession, the United States began to experience _______ in real GDP and _______ in the unemployment rate. "The economy tends toward instability and cyclical unemployment.". This is the currently selected item. Quizlet flashcards, activities and games help you improve your grades. there was a stock market crash at the beginning of the depression. As New Deal programs were enacted, the unemployment rate gradually lowered. Which of the following statements is consistent with what happened during the Great Depression? According to Keynesian economists, prices tend to be ______________. They were the first to be laid off from their jobs, and they suffered from an unemployment rate two to three times that of whites. During the Great Recession, the U.S. long-run aggregate supply curve shifted to the left, in part, because: there was an institutional breakdown in financial markets. more focus should be placed on aggregate demand than aggregate supply. the increase in unemployment was much greater and lasted longer. "Government intervention in the economy is sometimes necessary.". The Great Recession lasted longer and was deeper than the average recession, in part, because: there was a major financial crisis following the collapse of housing prices. The "first wave" of the Great Depression first began in _________ and initially lasted for _________. a. supply-side economics. The unemployment rate was over 25% at the height of the Great Depression. The Great Depression actually consisted of two separate recessions. Graph ____ depicts the conditions of the Great Recession, and graph _____ depicts the conditions of the Great Depression. In regard to the macroeconomy, it is believed by classical economists that: Among the beliefs held by classical economists, one is that: aggregate supply should be a bigger focus than aggregate demand. The Great Recession was different from other recessions since World War II in that: the overall economy took far longer to recover than the average. a decrease in consumer confidence and a decrease in financial market stability. The 1920s were a period of optimism and prosperity – for some Americans. Figure 17.1 “The Depression and the Recessionary Gap” shows the course of real GDP compared to potential output during the Great Depression. The Great Depression actually consisted of two separate recessions. When compared to other recessions, the Great Depression: had much larger decreases in real gross domestic product (GDP). Which of the following would have caused aggregate demand to decrease during the Great Depression? Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that, The Great Depression had _________ when compared to the average recession, When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because, the government didn't help the banks, causing the money supply to decrease, When considering the magnitude of the Great Depression in comparison to other recessions, the Great Depression, was the most severe recession in U.S. history, Which of the following statements is consistent with what happened during the Great Depression, Which of the following economic statements would a classical economist tend to support, Savings is crucial to economic growth because it leads to investment in productive capital, During the Great Depression, there was a financial crisis and a stock market crash, both of which, contributed to a very long and deep depression, When U.S. aggregate demand and long-run aggregate supply decreased during the Great Recession, real gross domestic product (GDP) also decreased, more focus should be placed on aggregate demand than aggregate supply. 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