Keynes Thought That the Behavior of the Economy in the Short

question 41

Essay

Keynes thought that the behavior 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:

Gene-environment Correlation

The concept that an individual's genes influence the environments they are exposed to, leading to situations where genetic and environmental factors are correlated.

Baby Talk

A form of speech characterized by simplified language, higher pitch, and exaggerated intonation used when speaking to infants.

Identical Twin Study

Research that compares identical twins to determine the relative influence of genetics versus environment on various traits or conditions.

Genes

Units of heredity made up of DNA that are responsible for the inherited traits and characteristics of organisms.