Question 39(1 point)

Which of the following statements is true?

a

TheGreat Depression of the 1930shit the whole world.

b

In the US, GDP fell by more than 25% between 1929 and 1933, and the unemployment rate reached 25% in 1933.

c

The Great Depression seemed to refute the classical idea that markets were self-correcting and would thus provide full employment.

d

All of the above.

e

Only a) and b)

Question 40(1 point)

Which of the following statements is true?

a

In 1906, John Maynard Keynes wroteThe General Theory of Employment, Interest, and Money, a book in which he providedan alternative theoryto the classical theory,whichhelped explain and solve recessions (and even depressions).

b

The modern aggregate expenditure model we are studying in this course is based onKeynesian economics(the set of ideas that have been proposed by Keynes and his followers). Keynesian economics is based on the idea that saving and investment decisions may not be coordinated, and that prices and wages are not very flexible downward (which can contribute to cyclical unemployment).

c

According to Keynesian economics, market forces can cause depressions (because the economy will not correct itself), and the government should play an active role in stabilizing the economy using macroeconomic policies, including fiscal and monetary policies.

d

All of the above.