How did the Great Depression affect economistsvbelief about macroeconomy?

Answer 1

The Great Depression fundamentally changed economists' beliefs about macroeconomics by highlighting the limitations of classical economic theories, which posited that markets are self-correcting. The severe and prolonged economic downturn led to increased interest in Keynesian economics, particularly John Maynard Keynes' ideas about aggregate demand and the importance of government intervention to stabilize the economy. This shift encouraged economists to focus more on macroeconomic policies, leading to the development of new models that addressed unemployment, inflation, and economic cycles. Ultimately, the Great Depression underscored the need for a more active role of government in managing economic fluctuations.