The depression of the 1930s

I. Read the following statements and answer True False or Uncertain to each with a brief justification for your answers. (60 points) 1. The major reason the depression of the 1930s was so severe and thus earned it the title of “Great Depression,” was that the declines in stock prices were so severe. 2. The major reason the Great Depression and the recession of 2007 to 2009 differed in intensity and duration was the difference in money-supply behavior in the two episodes. 2. The reason that the recoveries from the Great Depression and the recession of 2007 to 2009 were so sluggish and so protracted is that faulty government pollicis were followed in both., II. In the wake of the pandemic, calls for a new economic approach have been heard in a number of quarters. In the US, President Biden has urged the country to change the economic system around so that we can “build back better.” Another world leader calls upon us “not to follow the easy path of returning to a ‘normality’ … [but] to rethink our way of life and our economic and social systems.” Lurking in the background in both are the notions that it is possible to direct and organize economic activities according to some new blueprint and that government officials can and will do so effectively. (40 points) 1. What would Friedrich Hayek say regarding these calls to rethink and redo the economic system? Use his article ‘The Use of Knowledge in Society” and his book The Road to Serfdom in framing your answer. 2. Suppose you had to do an economic forecast of a country that was planning to adopt such an approach. Would whether it did so or not affect your forecasts of inflation and real growth? If so, why?