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Chapter 15: Problem 9

Classical economics lost most of its popularity in - \((\mathrm{LO} 3)\) a) the \(1920 \mathrm{~s}\) c) the \(1960 \mathrm{~s}\) b) the \(1930 \mathrm{~s}\) d) the \(1980 \mathrm{~s}\)

Short Answer

Expert verified
Classical economics lost most of its popularity in b) the 1930s due to the economic crisis of the Great Depression, which led to the rise of alternative economic theories like Keynesianism.

Step by step solution

01

Eliminate unlikely options

We can start by eliminating options that are unlikely to be the correct answer. Classical economics generally predates or doesn't align with the economic theories of the latter half of the 20th century. Therefore, we can eliminate options c (the 1960s) and d (the 1980s) as these decades are too late for this change to have taken place. Step 2: Assess Remaining Options
02

Assess the remaining options: the 1920s vs. the 1930s

With options a (the 1920s) and b (the 1930s) remaining, we can now assess which decade is more likely to be the time when classical economics lost popularity. Classical economics, which was based on laissez-faire policies and the idea that markets are self-regulating, began to decline due to economic crises that occurred during this time. Step 3: Identify the decisive event and correct choice
03

Choose the correct decade based on historical events

The Great Depression, which began in 1929 and lasted throughout the 1930s, caused many economists to question the validity of classical economics. As a result, newer economic theories, such as Keynesian economics, gained popularity. Therefore, the correct answer is b) the 1930s, as this was the decade when classical economics lost most of its popularity due to the economic crisis that took place, leading to the rise of alternative economic theories like Keynesianism.

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Most popular questions from this chapter

The conventional monetary policy to fight inflation would be to (LO9) a) increase the rate of monetary growth b) decrease the rate of monetary growth c) run budget deficits d) run budget surpluses

According to Keynes, was necessary to get us out of a depression. (LO4) a) investment spending b) consumer spending c) foreign spending d) any kind of spending

During a recession, if the money supply were increased \((\mathrm{LO4}, 5)\) a) the Keynesians and the monetarists agree that people would probably just hold on to these funds b) the Keynesians and the monetarists agree that people would spend this money on assets of one kind or another c) the Keynesians believe people would probably just hold on to these funds, while the monetarists believe people would spend this money on assets of one kind or another

The conventional fiscal policy to fight a recession would be to (LO9) a) increase the rate of monetary growth b) decrease the rate of monetary growth c) run budget deficits d) run budget surpluses

According to the classical economists, if the quantity of money that people wanted to save was greater than the amount that people wanted to invest, ( LO3) a) there would be a recession b) there would be inflation c) the interest rate would fall d) the interest rate would rise
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