Keynes Thought That the Behaviour of the Economy in the Short

question 243

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 businesspeople 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 GDP and prices.

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Definitions:

Problem-focused Coping

A strategy for dealing with stress by directly tackling the problem that is causing the stress.

Primary Appraisal

The initial evaluation process where an individual assesses the significance of an event as stressful, positive, controllable, challenging, or irrelevant.

Secondary Appraisal

The evaluation of one's ability to cope with the consequences of an event after initially assessing its significance.

Nicotine Inhaler

A medical device used to deliver nicotine vapor to the lungs, often used as a smoking cessation aid to help reduce withdrawal symptoms.