In the Commanding Heights video, you saw that during the 1920 's the U.S. economy was probably at q, on the graph from page 275 . By 1931 we were near point q, The Classical/Austrian economists of that time period argued that the government should:
a. Point A or even higher in segment III of the aggregate supply curve; B; not intervene in the economy because in the long run wages and input costs would fall causing aggregate supply to increase and the restoration of full employment.
b. E; D; increase taxes in order to reduce aggregate demand and lower the rate of inflation.
c. A; D; increase government spending on infrastructure programs in order to push aggregate demand closer to point E.
d. C ; B ; lower interest rates and increase government spending in order to create a multiplier effect that would stimulate aggregate demand in the short run and aggregate supply in the long run.