When Roosevelt cut spending in 1937, the U. S. economy returned to the abysmal economic status of 1932-1933; yet, despite reversing course and adopting the countercyclical, "compensatory" spending approach devised by economist John Maynard Keynes, what financial crisis ensued?

Question

Zain Cruz

Business

14 July, 21:12

When Roosevelt cut spending in 1937, the U. S. economy returned to the abysmal economic status of 1932-1933; yet, despite reversing course and adopting the countercyclical, "compensatory" spending approach devised by economist John Maynard Keynes, what financial crisis ensued?

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Evie Salinas · Answer 1

When Roosevelt cut spending in 1937, the U. S. economy returned to the abysmal economic status of 1932-1933

Explanation:

Economists believe that the recession during 1937 was the result of government's decision to curb government spending as this idea was immature. Even after Roosevelt's decision there was recession and political atmosphere heated up due to this.

Roosevelt and his advisors made a decision to curb government spending thinking it would take the country of recession. It is also believed that there was contraction in the money supply caused by 'Federal Reserve and Treasury Department' policies which may have contributed to the Recession. Unemployment grew worsening the situation.

The economist John Maynard Keynes supported the idea that government should increase the spending to increase demand.