During the Great Depression, output fell by 40% and unemployment hovered at 25%.

Question

During the Great Depression, output fell by 40% and unemployment hovered at 25%. According to the classical view of macroeconomics, what should have happened to reduce unemployment? Wages should have fallen, increasing demand for labor. Laborers should have switched industries, shrinking the ranks of the unemployed. The demand for jobs should have resulted in an increase in the supply of jobs. The excess supply of labor should have resulted in an increased demand for labor. During the Great Depression, output fell by 40% and unemployment hovered at 25%. According to the classical view of macroeconomics, what should have happened to reduce unemployment? Wages should have fallen, increasing demand for labor. Laborers should have switched industries, shrinking the ranks of the unemployed. The demand for jobs should have resulted in an increase in the supply of jobs. The excess supply of labor should have resulted in an increased demand for labor.

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Answer shoul be (A)

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