Why was the stock market crash of 1929 a disaster for the economy?
(a) Through the "wealth effect," investors lost paper wealth and consequently
reduced their spending on goods and services. This led to cutbacks in
production and jobs.
(b) Businessmen became pessimistic about the future and reduced spending on
plants and equipment, thus causing reduced production and increased layoffs
in the capital-goods sector of the economy.
(c) The crash revealed a flawed structure of credit and weak system of banks
and other financial institutions in the U.S.
(d) All of the above are correct
(d)
You might also like to view...
As the dollar exchange rate, e, decreases, the quantity of dollars supplied in the foreign exchange market ________, and the quantity of dollars demanded in the foreign exchange market ________.
A. decreases; decreases B. increases; increases C. decreases; increases D. increases; decreases
At the beginning of year one, there is no government debt outstanding. The government runs a $100 billion deficit in year one. Interest at a nominal rate of 10% must be paid starting in year two
Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%. Assume the government balances its primary budget in the future and the interest rate and growth rate do not change. (a) What will be the government deficit in years two, three, four, and five? (b) What will be the value of government bonds outstanding at the end of the fifth year? (c) What will be the debt—GDP ratio at the end of year five?
An indication that Insurance companies anticipate adverse selection is
a. they do not require a deductible b. they classify clients into different risk types according to their claim history c. they do not classify clients into different risk types according to pre-existing conditions d. they do not require a co-payment
Price elasticity of demand tends to be larger in the long run than in the short run. Which of the following is consistent with the reason why?
a. Because people see fewer and fewer substitutes for the good in the long run. b. Because if price rises, over time producers will be able to offer more substitutes. c. Because over time the good will become a smaller and smaller share of peoples' budget. d. Because over time people's incomes rise.