Part A

This question is based on an article from The Economist, "Lessons of the 1930s," published on December 10, 2011. (Link in comments). The article mentions several reasons why the Great Depression became a much bigger disaster that it would otherwise have been. Based on the article, which one of the following factors is commonly viewed by the economists as a key cause of the deepening of the Great Depression?

1. a.In the early 1930s, labor costs rose due to government intervention.
2. b.In the early 1930s, the government's regulatory burden on businesses more than doubled.
3. c.In the early 1930s, fiscal and monetary policies became severely contractionary.
4. d.In the early 1930s, fiscal and monetary authorities slashed taxes and interest rates.
5. e.In the early 1930s, various countries colluded over their exchange rate and trade policies.

Part B

The same article, "Lessons of the 1930s," discusses the debates regarding the impact of macroeconomic policies on the recovery of the US economy during 1933 and 1936. According to this discussion, which one of the following is claimed by some economists as a contributory factor in that recovery?

1. a.Increased government spending.
2. b.Roosevelt's determination to get the budget balanced.
3. c.Congress's spending cuts.
4. d.Congress's tax increases.
5. e.Doubling of the reserve requirements by the Fed.

Part C

According to the article, "Lessons of the 1930s," reliance on the gold standard for exchange rate determination in the early 1930s

1. a.helped stabilize European economies and financial systems.
2. b.contributed to destabilization of European economies and financial systems.
3. c.had no impact on the stability of European economies and financial systems.
4. d.had no similarity with the use of the euro system in Europe these days.
5. e.freed central banks to expand the money supply and reflate their economies.

Part D

The article, "Lessons of the 1930s," points out that the trade policies followed by the governments after the collapse of the gold standard in the early 1930s have lessons for the ways in which the current economic crises around the world should be addressed. One of these lessons for the United States is that

1. a.the US should sanction any country that devalues its currency against the US dollar.
2. b.the US should sanction any country that revalues its currency against the US dollar.
3. c.the US should impose trade restrictions on imports from countries like China that manipulate their currencies' exchange rates
4. d.the US should coordinate its trade and macroeconomic policies with other countries to avoid competitive devaluations.
5. e.the US should devalue its currency to expand its net exports and speed up its recovery process.