What happened during the Great Depression?
What will be an ideal response?
The Great Depression started in 1929, coinciding with a crash in the U.S. stock market. From 1929 to 1933, the crisis deepened as stock markets around the world continued to fall. At its bottom in 1933, the U.S. stock market was about 80 percent below its peak four years earlier. Millions of U.S. farmers and homeowners went bankrupt. Real GDP fell 26.3 percent below its 1929 level, and unemployment eventually rose from 3 percent in 1929 to 25 percent in 1933. From 1929 to 1933, the number of banks in the United States fell from 23,679 to 14,207. This decline was driven by failing banks that either went out of business altogether or were acquired by stronger competitors. Similar events occurred in almost all developed countries around the world, though the U.S. contraction was among the most severe.
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During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?
A) increase government expenditure, decrease taxes, increase the quantity of money B) increase government expenditure, decrease taxes, decrease the quantity of money C) decrease government expenditure, increase taxes, decrease the quantity of money D) do not change government expenditures or taxes , increase the quantity of money E) decrease government expenditures, increase taxes, do not change the quantity of money
The natural rate of output is ________
A) independent of the inflation rate B) always lower than potential output C) unrelated to the natural rate of unemployment D) all of the above E) none of the above