Multiple Choice
Which of the following is NOT considered an automatic stabilizer in macroeconomics?
79
views
1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
Which of the following best explains why the American economy was suddenly in shambles at the end of the 1920s?
A
A stock market crash led to widespread bank failures and a severe contraction in economic activity.
B
The discovery of new gold reserves destabilized the currency.
C
A major oil embargo by foreign nations halted industrial production.
D
A sudden increase in government spending caused hyperinflation.
Verified step by step guidance1
Step 1: Understand the historical context of the late 1920s in the American economy, focusing on key events that could cause economic downturns.
Step 2: Identify the role of the stock market crash in 1929, which led to a loss of wealth and confidence among investors and consumers.
Step 3: Recognize how the stock market crash triggered widespread bank failures due to bad loans and runs on banks, reducing the availability of credit.
Step 4: Analyze how these bank failures and loss of credit caused a severe contraction in economic activity, leading to reduced production, higher unemployment, and a deep recession.
Step 5: Compare the other options (gold reserves, oil embargo, government spending) and explain why they do not align with the historical causes of the economic collapse at the end of the 1920s.
Related Videos
Related Practice
