Consider the following statements regarding the ‘Great Depression of 1929’: 1. It led to a sharp decline in the demand for goods in North American markets. 2. The unemployment rate in the USA remained constant at 3 % between 1929 and 1933. 3. It provided the context for the emergence of macroeconomics as a separate subject. Which of the statements given above is/are correct?

The correct option is 1 and 3 only. Explanation The Great Depression of 1929 was a severe worldwide economic downturn that originated in the United States. It exposed the limitations of classical economic theories regarding market self-correction and necessitated a new framework for understanding economy-wide phenomena. Statement-wise Analysis: - Statement 1 is Correct: The Great Depression was triggered by a stock market crash and resulted in a catastrophic collapse in aggregate demand. This led to a sharp decline in the demand for goods, production levels, and investment in North American markets and subsequently the global economy. - Statement 2 is Incorrect: The unemployment situation deteriorated drastically during this period. While the unemployment rate in the USA was around 3 % in 1929, it did not remain constant; it surged to approximately 25 % by 1933. - Statement 3 is Correct: The inability of classical economics to explain the prolonged mass unemployment and economic stagnation provided the context for the emergence of Macroeconomics as a separate discipline. This shift is largely attributed to John Maynard Keynes and his work, The General Theory of Employment, Interest and Money (1936), which focused on aggregate variables rather than individual markets. Key Takeaway: The Great Depression highlighted the failure of the "invisible hand" to restore full employment, leading to the Keynesian Revolution and the establishment of Macroeconomics to study aggregates like total output and employment.

NCERT Class 12 Economics — Chapter 3: Introduction to Macroeconomics and its Concepts

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Consider the following statements regarding the ‘Great Depression of 1929’:

It led to a sharp decline in the demand for goods in North American markets.
The unemployment rate in the USA remained constant at 3 % between 1929 and 1933.
It provided the context for the emergence of macroeconomics as a separate subject.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 2 only
B1 and 3 only
C1, 2 and 3
D2 only

Did you get this right?

Solution

The correct option is 1 and 3 only.

Explanation

The Great Depression of 1929 was a severe worldwide economic downturn that originated in the United States. It exposed the limitations of classical economic theories regarding market self-correction and necessitated a new framework for understanding economy-wide phenomena.

Statement-wise Analysis:

Statement 1 is Correct: The Great Depression was triggered by a stock market crash and resulted in a catastrophic collapse in aggregate demand. This led to a sharp decline in the demand for goods, production levels, and investment in North American markets and subsequently the global economy.
Statement 2 is Incorrect: The unemployment situation deteriorated drastically during this period. While the unemployment rate in the USA was around 3 % in 1929, it did not remain constant; it surged to approximately 25 % by 1933.
Statement 3 is Correct: The inability of classical economics to explain the prolonged mass unemployment and economic stagnation provided the context for the emergence of Macroeconomics as a separate discipline. This shift is largely attributed to John Maynard Keynes and his work, The General Theory of Employment, Interest and Money (1936), which focused on aggregate variables rather than individual markets.

Key Takeaway: The Great Depression highlighted the failure of the "invisible hand" to restore full employment, leading to the Keynesian Revolution and the establishment of Macroeconomics to study aggregates like total output and employment.

Your note

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Consider the following statements regarding the aggregation in macroeconomics: 1. The price level of the representative good is unrelated to the general price level of the economy. 2. Macroeconomics often simplifies analysis by focusing on a single representative good. 3. This simplification captures all distinctive characteristics of individual goods, such as the difference between agricultural and industrial production conditions. Which of the statements given above is/are correct?

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The correct option is 1 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Correct: The Great Depression was triggered by a stock market crash and resulted in a catastrophic collapse in aggregate demand. This led to a sharp decline in the demand for goods, production levels, and investment in North American markets and subsequently the global economy.
Statement 2 is Incorrect: The unemployment situation deteriorated drastically during this period. While the unemployment rate in the USA was around 3 % in 1929, it did not remain constant; it surged to approximately 25 % by 1933.
Statement 3 is Correct: The inability of classical economics to explain the prolonged mass unemployment and economic stagnation provided the context for the emergence of Macroeconomics as a separate discipline. This shift is largely attributed to John Maynard Keynes and his work, The General Theory of Employment, Interest and Money (1936), which focused on aggregate variables rather than individual markets.