The Era of Prohibition Began in 1920 When the Volstead

question 88

Multiple Choice

The era of Prohibition began in 1920 when the Volstead Act was passed to implement the Eighteenth Amendment to the Constitution, which prohibited the production and sale of liquor and beer. In 1920 much of this activity went underground, and Al Capone became a leading illegal entrepreneur. Assuming the amount of liquor and beer produced stayed the same, what was the effect of the Volstead Act on the GDP in 1920?

• A)​GDP would have declined, since activities in the underground economy are not included.
• B)​GDP would have remained the same, since only the organization producing the goods changed.
• C)​GDP would have increased, because production in the underground economy increased.
• D)​Real GDP would have increased, while nominal GDP would have decreased.

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Definitions:

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A legal principle that prohibits someone from being prosecuted twice for the same offense, ensuring protection against multiple punishments.

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An amendment to the U.S. Constitution guaranteeing equal protection under the law to all citizens and outlining the rights of citizens.

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