Refer to the Front Page and the figure to answer two questions. FRONT PAGE Fiscal Policy in the Great Depression in 1931 President Herbert Hoover observed, "Business depressions have been recurrent in the life of our country and are but transitory." Rather than proposing fiscal stimulus, Hoover complained that expansion of public works programs had unbalanced the federal budget. In 1932 he proposed cutbacks in government spending and higher taxes. In his view, the "unquestioned balancing of the federal budget is the first necessity of national stability and is the foundation of further recovery." Franklin Roosevelt shared this view of fiscal policy. He criticized Hoover for not balancing the budget and in 1933 warned Congress that "all public works must be considered from the point of view of the ability of the government treasury to pay for them." As the accompanying figure shows, the budget deficit persisted throughout the Great Depression But these deficits were the result of a declining economy, not stimulative fiscal policy. The structural deficit actually decreased from 1931 to 1933 (see figure), when fiscal restraint was pursued. This restraint reduced aggregate spending at a time when producers were desperate for increasing sales. Only when the structural deficit was expanded tremendously by spending during World War II did fiscal policy have a decidedly positive effect. Federal defense expenditures jumped from $2.2 billion in 1940 to $87.4 billion in 1944 Source Brown, E. Carey, "Fiscal Policy in the Thirties A Reappraisal," American Economic Review, December 1956. Table 1, The American Economic Association, 1956. BUDGET BALANCES (billions of dollars per year) +$5.0 +4.0 +3.0 +2.0 +1.0 0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 -7.0 restraint-> Fiscal Actual budget deficits Structural deficits and surpluses 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 YEAR Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. How much fiscal restraint or stimulus occurred between 1931 and 1933? $ billion of fiscal (Click to select) occurred between 1931 and 1933. b. By how much did this policy change aggregate demand if the MPC was 075? billion