Typically, the economy recovers fairly quickly from a recession. Why did this NOT happen in the United States during the Great Depression?
What will be an ideal response?
The 25% decline in the price level from 1930-1933 triggered a debt deflation. The loss of net worth increased adverse selection and moral hazard problems in the credit markets and increased and prolonged the economic contraction.
You might also like to view...
The Federal Reserve has been ________ preemptive because of the changing view that monetary policy has to be ________ looking
A) more; forward B) more; backward C) less; forward D) less; backward
What activity does the Fed undertake when it carries out open-market operations? a. It buys and sells the bonds, but not the notes, of leading U.S. corporations
b. It changes the legal reserve requirements for member banks. c. It changes the discount rate, which generally increases the amount of available credit. d. It provides funds so that healthy depository institutions can purchase weaker ones on the open market. e. It deals in the purchase and sale of U.S. government securities.
In some financial situations, people have a tendency to hold on to their money. Which of the following are the accurate coordinates for this type of situation?
a. i2 moves down and M2 moves to the left
b. i1 moves up and M2 moves to the left
c. i2 moves up and M1 moves to the left
d. i2 moves down and M1 moves to the right
Karl Marx published:
A. Das Kapital. B. General Theory of Communism. C. The Wealth of Nations. D. Capitalist Manifesto.