Which of the Following Was True of Fiscal Policy During

question 17

Multiple Choice

Which of the following was true of fiscal policy during the Great Depression?

• A) The federal government generally ran a budget surplus and this reduced aggregate demand.
• B) The federal government persistently balanced its budget during the 1930s.
• C) Government spending was reduced as a share of GDP and budget deficits were small.
• D) Government spending increased as a share of GDP but budget deficits were relatively small (generally less than 4 percent of GDP).

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Definitions:

CPI

Consumer Price Index, a measure indicating the average price level of a basket of goods and services purchased by households, used to estimate inflation.

Base Year

A reference year against which economic or financial data is compared to measure economic performance or inflation.

Prices

Monetary values assigned to goods and services, which are determined by supply and demand dynamics in the market.

Misery Index

An economic indicator created by summing the unemployment rate and the inflation rate, intended to measure the health of an economy.