The manipulation of spending to influence aggregate demand was first put forward because:
A)the classical view of flexible prices and wages did not necessarily hold in reality.
B)unemployment often remained stubbornly high for too long during and after a depression.
C)inflation was extremely high during the Great Depression.
D)aggregate demand rose too quickly during the Great Depression.
E)the classical view of flexible prices and wages did not necessarily hold in reality and unemployment often remained stubbornly high for too long during and after a depression.

Question

Quizplus · Accepted Answer

The first sentence of option E explains that the classical view of flexible prices and wages did not necessarily hold in reality, which implies that the economy may not always self-correct. The second sentence of option E explains that unemployment often remained stubbornly high for too long during and after a depression, which also suggests that the economy may not self-correct. Together, these two reasons suggest why the manipulation of spending to influence aggregate demand was first put forward as a way to address economic downturns. Therefore, option E is the best choice.

The Manipulation of Spending to Influence Aggregate Demand Was First