Question 37(1 point)

Which of the following statements is true about the Great Recession?

a

The recession of 2007-2009 was the worst recession in US history.

b

In 2008 and 2009 the Federal government used Keynesian economics to try to end the recession. The idea was to increase aggregate expenditure (total spending) in order to eliminate the recessionary expenditure gap and bring the economy to full-employment GDP.

c

The Federal government pursued policies such as tax rebate checks for taxpayers, and a $787 billion stimulus package that consisted in increases in G and reductions in T.

d

All of the above.

e

Only b) and c)

Question 38(1 point)

Which of the following statements is true aboutmost economistsuntil the Great Depression?

a

Until the Great Depression of the 1930s,most economistsgoing back to Adam Smith believed that a market system would ensure full employment of the economy's resources, except for temporary, short-term upheavals. They believed inLaissez-faire economicsand theinvisible hand.

b

These economistsbelieved that if there were deviations frompotential output, they would self-correct. A slump in output and employment would reduce prices (which would increase consumption), lower wages (which would increase employment), and lower interest rates (which would expand investment).

c

These economists did not believe inSay's law, which states that "Supply creates its own demand."

d

All of the above.

e

Only a) and b)