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Katarina [22]
3 years ago
15

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in pric

es and output that occurred during the onset of the Great Depression?
History
1 answer:
Olenka [21]3 years ago
5 0

Answer:

The correct answer is aggregate demand.

Explanation:

On the onset of the great depression, the stock market crash led to a reduction in consumer confidence. As a result, the investment in capital market declined. This caused the aggregate demand curve to shift to the left. This further caused nominal wages to increase. As a result, the aggregate supply increased.  

The reduction in wealth affected the consumer confidence adversely causing a further reduction in consumption and thus decline in aggregate demand. When the government revenue declined due to a fall in income and consumption, the governments increased tax rates to compensate. Higher taxes further led to a fall in disposable income causing consumption and aggregate demand to decline.

The rightward shift in the aggregate supply curve because of a fall in nominal wages failed to increase real GDP because of continuous reduction in aggregate demand.

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