Using a graph, analyze the Great Depression from a Keynesian ...

[fnuegbu]

Using a graph, analyze the Great Depression from a Keynesian perspective. What happened to unemployment?
 
  What will be an ideal response?

Question 2

At the point at which planned real consumption spending is equal to real disposable income
 
  A) the consumption function is above the 45-degree line.
  B) the consumption function intersects the savings function.
  C) the consumption function intersects the 45-degree line.
  D) the consumption function is below the 45-degree line.

[ryansturges]

Answer to Question 1

In the below figure, the equilibrium before the depression was at a price level of 100 and real GDP of 1 trillion. The depression was caused by a reduction in aggregate demand to AD1933. Because prices were not flexible, real GDP fell to 700 billion. The reduced output would be associated with a large increase in unemployment.

Answer to Question 2

C

[fnuegbu]

TYSM

[softEldritch]

Excellent