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Which of the following did monetarist economists blame for the Great Depression of the 1930s, as noted in the chapter?
AA banking crisis and low money supply
BExcessive aggregate effective demand
CA surge in private investment spending
DRapid clustering of new innovations
Answer & Solution
Correct answer: A. A banking crisis and low money supply
1. The chapter says economists differ on the causes of the Great Depression.
2. Keynes blamed lower aggregate expenditures in the economy.
3. Monetarists held a different view of the cause.
4. They attributed it to the banking crisis and low money supply.
5. So the correct choice is a banking crisis and low money supply.
6. "Excessive aggregate demand" is ruled out: it was a fall, not excess, in demand that was blamed.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.5_
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