In the Midst of the Great Depression in 1932, Congress

question 8

Multiple Choice

In the midst of the Great Depression in 1932, Congress and the Hoover administration increased tax rates substantially. According to the Keynesian view, this tax increase was

• A) inappropriate because it would depress economic activity and lead to further increases in unemployment.
• B) appropriate because it would lead to a significant increase in the money supply and, thereby, increase employment.
• C) inappropriate because it would decrease the money supply and, thereby, prolong the Depression.
• D) appropriate because it would stimulate economic activity and help end the Depression.

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Definitions:

Poorest 20 Percent

The segment of the population with the lowest income, representing the bottom quintile in the distribution of income or wealth.

World Income

The total income generated by individuals and entities across the globe.

Per Capita Income

The average income earned per person in a given area in a specified year.