Question

During the Great Depression, depositors "ran" to banks to withdraw their funds. When  too many depositors want to withdraw all at once, the bank will become insolvent. After the Great Depression, what program was created to maintain depositor confidence and prevent banking panics?

		social security
		collective bargaining
		unemployment benefits
		bank deposit insurance

Deflation is particularly bad for an economy because of all of the following EXCEPT

		higher interest rates
		spending is postponed
		asset values decline, further lowering spending
		deflations tend to spiral

In response to a negative aggregate demand shock, monetary or fiscal policy may take action to try to do which of the following:

		increase national spending and shift the aggregate demand curve to the left
		decrease national spending and shift the aggregate demand curve to the right
		increase national spending and shift the aggregate demand curve to the right
		decrease national spending and shift the aggregate demand curve to the left

Which of the following was NOT developed after the Great Depression to help diminish the severity of future economic downturns

		social security
		unemployment compensation
		the creation of the Federal Reserve
		bank deposit insurance

Answer 1

a) "D"

bank deposit insurance was started by the government after the great depression to encourage people storing money in the banks.

b) "A"

higher interest rates are not possible in deflation, the interest rate falls.

c) "C"

they will try to increase the national spending through expansionary fiscal and expansionary monetary policy and that will shift the AD curve to the right.

d) "C"

the Federal reserve was created in the year 1913 not after the depression.