Which Component of Aggregate Demand Plunged Sharply at the Start

question 35

Multiple Choice

Which component of aggregate demand plunged sharply at the start of the Great Depression?

• A) investment
• B) consumption
• C) government purchases
• D) transfer payments

---

Definitions:

Natural Rate

The rate of a quantity, such as unemployment or interest, that prevails when the economy is in a long-term equilibrium.

Classical Dichotomy

The theoretical separation of nominal and real variables in classical economics, suggesting that changes in the money supply only affect nominal variables.

Inflation Rate

An upward movement in the overall price level of goods and services in an economy over time.

Aggregate Demand

Aggregate request for products and services in an economy, measured at a particular general price level throughout a defined time interval.