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.