[Related to the Making the Connection on page 535] Economist Robert Gordon has written the following: During 1939, more than any other year in the

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[Related to the Making the Connection on page 535] Economist Robert Gordon has written the following:

During 1939, more than any other year in the dismal Depression decade, the American economy exhibited every evidence of slipping into a low-employment trap. Prices were on a plateau, with no tendency to decline, despite high unemployment.

a. What does Gordon mean by a “low-employment trap”? (Hint: Think about Gordon’s explanation for the high unemployment rate in 1939, as discussed in the Making the Connection.)

b. Why might the fact that prices were not declining despite high unemployment lead to the conclusion that the economy was in a low-employment trap?

Source: Robert J. Gordon, “Back to the Future:

European Unemployment Today Viewed from America in 1939,” Brookings Papers on Economic Activity, Vol. 19, No. 1, 1988, p. 272.