The Primary Factor That Caused Most Economists to Lose Their

question 10

Multiple Choice

The primary factor that caused most economists to lose their faith in the classical approach to macroeconomic policy was

• A) the high levels of unemployment that occurred during the Great Depression.
• B) the presence of both high unemployment and high inflation during the 1970s.
• C) theoretical proof that classical ideas were invalid.
• D) evidence that classical ideas were useful during economic booms, but not during economic recessions.

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Definitions:

Buying Power

The amount of goods or services that one's money can purchase, often influenced by inflation.

Rate of Return

Gains or losses incurred on an investment over a specifically defined period, formulated as a percentage of the investment’s kickoff cost.

Floating-rate Bonds

Bonds that have a variable interest rate, which adjusts periodically according to a benchmark interest rate or index.

Coupon Rate

The interest rate stated on a bond or other fixed-income security, representing the annual interest paid by the issuer to the bondholder.