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-(Figure: Fiscal Policy and the End of the Great Depression) Refer to Figure: Fiscal Policy and the End of the Great Depression. The period from 1936 to 1938 would seem to indicate that in the short run a decrease in government deficit spending can _____ the unemployment rate.
A) reduce
B) increase
C) not affect
D) eliminate

Question

Use the following to answer questions: 
-(Figure: Fiscal Policy and the End of the Great Depression) Refer to Figure: Fiscal Policy and the End of the Great Depression. The period from 1936 to 1938 would seem to indicate that in the short run a decrease in government deficit spending can _____ the unemployment rate.
A) reduce 
B) increase 
C) not affect 
D) eliminate

Quizplus · Accepted Answer

The period from 1936 to 1938, during which the U.S. government reduced deficit spending, saw an increase in the unemployment rate, indicating that in the short run, a decrease in government deficit spending can increase the unemployment rate. This is because reduced government spending can lead to lower overall demand in the economy, which can in turn lead to higher unemployment.

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