Using a graph, analyze the Great Depression from a Keynesian perspecti

Using a graph, analyze the Great Depression from a Keynesian perspective. What happened to unemployment?

What will be an ideal response?

ANSWER

In the below figure, the equilibrium before the depression was at a price level of 100 and real GDP of $1 trillion. The depression was caused by a reduction in aggregate demand to AD1933. Because prices were not flexible, real GDP fell to $700 billion. The reduced output would be associated with a large increase in unemployment.