Keynes Thought That the Behaviour of the Economy in the Short

question 5

Essay

Keynes thought that the behaviour of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

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Definitions:

Intangible Assets

Assets that cannot be physically touched or held, such as patents, trademarks, and goodwill.

Tangible Assets

Physical and material assets, such as machinery, buildings, and land, that have a value and can be seen and touched.

Comparable Business

A company or business model similar in size, scope, or industry to another, used for benchmarking or competitive analysis.

Expense Ratios

A measure of what an investment fund charges its shareholders for portfolio management, expressed as a percentage of the fund's assets.