How could the existence of an unemployment insurance system or other transfer programs have reduced the severity of the Great Depression?
What will be an ideal response?
If these programs existed during the Great Depression, they would have mitigated its severity. In our economy today, workers laid off during a recession receive unemployment insurance payments. This extra income results in these workers spending more than they would have without these payments. In addition, households whose incomes fall below certain levels during recessions become eligible for food stamps and other programs. These transfers also help increase spending by these households. The increased spending happens automatically, stimulates aggregate demand, and helps stabilize the economy. These programs did not exist during the Great Depression. Workers who lost their jobs had their incomes drop to zero and had to rely on savings, charity, and borrowing to survive. These workers dramatically cut back on their spending. This contributed to making the economic slowdown worse.
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Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment. Which of the following will happen in the short run?
A) The aggregate demand curve will shift to the right. B) Unemployment will rise. C) Prices will rise. D) Output will rise.
Price elasticity of demand relates to the
a. sensitivity of people's quantity demanded to changes in price b. sensitivity of price to changes in people's quantity demanded c. percentage shifts in demand when price changes d. percentage shifts in demand for every one-percent change in price e. ratio of actual to expected price changes
Suppose that a company hires recent college graduates for two types of jobs, sales people and credit analysts. The hours worked and skill levels are the same for both positions. The sales people must "cold call," which many people find to be unpleasant. When comparing the salaries of the two positions, it is likely that the company pays the
a. credit analysts more as a compensating differential. b. sales people more as a compensating differential. c. same salary for both positions because they require the same skill level. d. same salary for both positions because it would be illegal to do otherwise.
In 1999, the Eurozone was:
A) formed by all European countries to reduce tariffs. B) formed by 11 countries to adopt a new currency. C) formed by 21 countries to allow labor migration between countries. D) renamed the World Trade Organization.