During the Great Recession, the unemployment rate climbed as high as _________ and remained around 8% _________ months after the recession began. The Great Depression was a difficult, life-altering period in the United States when millions of people struggled to find work and get by. When considering the basic operations of the macroeconomy, Keynesian economists argue that: the decline in real GDP was much larger and lasted longer. Classical economists believe that savings is crucial for economic growth because: savings leads to investment spending, which increases output. The primary cause of the Great Depression was a decrease in aggregate demand. The Classical Model. Our mission is to provide a free, world-class education to anyone, anywhere. Of the following factors, which would have caused aggregate demand to decrease? 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. The Classical Model was popular before the Great Depression. If asked about the basic functioning of the economy, a classical economist would claim that: the market tends toward stability and full employment. 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. How many months did the Great Recession last? Note that E1 and E2, respectively, are the initial and final equilibrium points before and after the wealth decrease. The second purpose arose as a reaction to the great depression. As a result: During the Great Recession, U.S. household wealth declined, leading to a decrease in aggregate demand. It looks like your browser needs an update. 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. 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. The Great Depression had _________ when compared to the average recession. According to Keynesian economists, prices tend to be ______________. During the Great Recession, __________ caused long-run aggregate supply to decrease. Which of the following policy statements would a Keynesian economist tend to support? The need for pensions prompted the Townsend Plan, which emerged in 1933 and quickly won large public support. This spike in unemployment was caused by the large decrease in aggregate demand. 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. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. A stock market crash in __________ is generally viewed as the beginning of the Great Depression. The Great Depression actually consisted of two separate recessions. These changes occur because of _____________. the economy can adjust back to full employment on its own. 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. 11/08/2015 ° Prior to the great depression, the purpose of the federal budget was to finance the activities of the federal government. The "second wave" of the Great Depression began in _________ and lasted for _________. 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 ________. 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. Which of the following events would have caused such a decrease? the economy needs help in moving back to full employment. As a result, Keynesian economists focus on _____________ changes and aggregate ____________. The 1920s were a period of optimism and prosperity – for some Americans. Which of the following statements is consistent with what happened during the Great Depression? more focus should be placed on aggregate demand than aggregate supply. During the Great Recession, aggregate demand ________ and long-run aggregate supply ________. 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. The Great Recession is characterized by a decrease in aggregate demand. The unemployment rate was over 25% at the height of the Great Depression. During the Great Depression, aggregate demand decreased. The Great Depression in the United States began as an ordinary recession in the summer of 1929, but became increasingly worse … 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. African American life during the Great Depression and the New Deal. As a result, the price level _________ and real gross domestic product (GDP) _________. 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. 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