Question

We discussed that President Roosevelt shifted SRAS to the left when he cartelized industries and boosted prices, making the economic downturn really bad. While some of government spending went to social programs, a rather large amount of government activity involved creating inflation. There are other things he could have done to mitigate, rather than exacerbate, the problem. Which of the following would have instead brought the economy back to full employment? (Check all that apply.)
A. Increase business taxes.
B. Reduce business regulations.
C. Strengthen labor unions
D. Spend money only on social programs.

Answer 1

Answer:

One of the things President Roosevelt could have done to mitigate, rather than exacerbate inflation or economic downturn was:

B. Reduce business regulations.

Explanation:

During his tenure government obtained the legal backing to regulate businesses.  We are aware of the detrimental effects of business regulations by government, which skyrocketed from 1936 at the height of the New Deal measures, thereby increasing the compliance burden on businesses.  Some of the newest regulations include the Federal Trade Commission (FTC), the Fair Packaging and Labeling Act of 1966, Fair Labor Standards Act (FLSA), The Employee Retirement Income Security Act (ERISA), the Environmental Protection Agency (EPA), and several Privacy laws.