Practice question · Multiple choice
The Long Depression (1873–1896) was marked by falling price levels rather than a collapse in overall output. What does this distinction reveal about the economic restructuring that followed?
Hints
- Did industrial production contract during this era, or did the return on goods decline?
- How might producers safeguard their profit margins when price competition becomes ruinous?
Show the answer
A. Deflation squeezed profits, prompting cartelisation and protective tariffs
Why
Price declines eroded profit margins despite rising volumes, incentivising market concentration and defensive trade barriers. Conflating deflation with a decline in output obscures why industrial rationalisation occurred, while Britain uniquely retained free trade.
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