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:

Early Supporters

Individuals or groups that first back or endorse a new idea, project, or innovation.

Evolution

The process through which populations of organisms change over generations, driven by mechanisms such as natural selection and genetic drift.

Chordate

A member of a diverse phylum of animals that includes the vertebrates, lancelets, and tunicates. As embryos, chordates all have a notochord (a hollow nerve cord), pharyngeal gill slits, and a post-anal tail. Many present-day chordates lose or modify these structures as they develop into adults.