What economic circumstance led to the recession in 1937, commonly referred to as the Roosevelt recession?

The Roosevelt Recession of 1937 was primarily caused by a decline in profits, investment, and a tightening of the money supply. After several years of economic recovery following the Great Depression, the U.S. economy faced a setback due to a combination of factors, including reduced government spending as part of an effort to balance the budget. This reduction in federal spending led to a decrease in jobs and a contraction in the economic activity that had been recovering.

Additionally, the Federal Reserve tightened monetary policy by raising reserve requirements for banks, which restricted the money supply. As credit became less accessible, businesses found it more challenging to invest and expand, leading to decreased profits. Consequently, consumer confidence and spending also dropped, contributing to the overall economic downturn.

The other options do not accurately reflect the key economic dynamics at play during this period. While federal spending and job creation had initially helped spur recovery, their reduction was not beneficial. Similarly, there was not a significant uptick in consumer spending or investment during this recession, and the introduction of new taxes targeting wealthy citizens was not a primary driver of the economic downturn. Instead, the recession was a direct result of the contraction in government support and the tightening of monetary policy that stifled economic momentum.