Classical macroeconomic theory was discredited and gave way to the first Keynesian approach as a result of
A)the collapse of the gold standard at the outset of World War I.
B)the Great Depression of the 1930s.
C)the wage-price controls of World War II.
D)the rapid inflation of the late 1960s.
E)the switch from fixed to flexible exchange rates in the early 1970s.

Question

Quizplus · Accepted Answer

Classical macroeconomic theory failed to explain and address the issues brought about by the Great Depression of the 1930s. As a result, there was a shift towards the first Keynesian approach, which emphasized the role of government intervention in stabilizing the economy through fiscal and monetary policies.

Classical Macroeconomic Theory Was Discredited and Gave Way to the First