Final answer:
The Reconstruction Finance Corporation was an embodiment of the 'trickle down' theory, where financial support to major institutions was supposed to benefit the wider economy, but often failed to provide direct assistance to those in need.
Step-by-step explanation:
The Reconstruction Finance Corporation (RFC) is closely related to the "trickle-down" theory because its primary mission was to provide financial support to banks and large institutions, which in theory, would eventually benefit the broader economy. Established by President Hoover in 1932, the RFC allocated $2 billion to save banks, credit unions, and insurance companies.
However, its focus on providing money to banks with collateral meant that mostly large banks benefited, leaving small banks and individuals in need with minimal support. This approach aligns with the trickle-down theory, which posits that economic benefits provided to the top tier of society will ultimately flow down to those at the bottom.
The trickle-down theory later gained prominence during Reagan's presidency as part of "Reaganomics," where the administration reduced taxes for the wealthy in the belief that this would create jobs and stimulate economic growth for the entire nation. Critics, however, often argue that such policies fail to provide sufficient direct support to those most affected during economic downturns.