Question

The effect of the Great Depression on conventional wisdom was to:

A:shift thoughts and opinions to the Keynesian view.

B:neither confirm nor cast doubt on the conventional view.

C:reinforce the conventional view.

D:No answer text provided.

Answer 1

Before the Great Depression, Classical economics dominated the economic thought and policies. The role of government was considered of an non interfering entity in the economy and it was maintained that economy is a self-regulating mechanism and can deal with downturn in business cycle on its own.

However, during the Great Depression, this economic thought was not able to explain the cause of the downturn as well as self regulating mechanism as advocated by the Classical economists was not working as well.

In such scenario, Keynes advocated for the role of government in economy and it is the government intervention that have brought the economy out of that Great Depression.

So, after Great Depression conventional wisdom turned towards the Keynesian economic thoughts and rely more on it to solve economic fluctuations.

Thus,

The effect of the Great Depression on conventional wisdom was to shift thoughts and opinions to the Keynesian view.

Hence, the correct answer is the option (A).