Suppose That Initially U

question 4

Essay

Suppose that initially U.S.households are saving only a small fraction of their incomes because they are relying on rapid increases in stock prices to increase their wealth.If stock prices decline and households decide to increase their saving rate,what will be impact on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

---

Definitions:

Attractiveness

A quality that makes something or someone pleasing or appealing to the senses, particularly in appearance or manner.

Non-Human Endorsers

Entities other than living people (such as characters, animals, or mascots) used in advertising campaigns to promote products or brands.

Two-Factor Theory

A psychological theory that proposes human emotions are influenced by two main factors: arousal and valence.

Source Credibility

the perceived trustworthiness, expertise, and reliability of the source of information.