According to the text, most economists believe that the Great Depression is unlikely to recur. Which of these would NOT be a reason to believe this?The Federal Reserve is unlikely to let the money supply fall substantially.Greater efforts are made today to limit government expenditures during recessions.Widespread U.S. bank failures are less likely to occur.The U.S. federal budget has more automatic stabilizers than it did in the 1930s.
Question
According to the text, most economists believe that the Great Depression is unlikely to recur. Which of these would NOT be a reason to believe this?The Federal Reserve is unlikely to let the money supply fall substantially.Greater efforts are made today to limit government expenditures during recessions.Widespread U.S. bank failures are less likely to occur.The U.S. federal budget has more automatic stabilizers than it did in the 1930s.
Solution
The statement "Greater efforts are made today to limit government expenditures during recessions" would NOT be a reason to believe that the Great Depression is unlikely to recur. This is because during recessions, increased government spending is often necessary to stimulate the economy and prevent a deeper economic downturn. This is a principle of Keynesian economics, which argues that during recessions, government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration. Therefore, limiting government expenditures during recessions could potentially exacerbate the situation, rather than prevent a depression.
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