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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.


Definitions:

The Philosophy of Manufacturers

An outlook or system of thought concerning the principles, practices, and ethics of producers and manufacturers.

Zygote

The initial cell formed when a new organism is produced by the union of sperm and egg cells, representing the earliest developmental stage of the embryo.

Embryo

An early stage in the development of a multicellular organism following fertilization, during which the organism undergoes rapid cell division and differentiates into the basic structures of a mature organism.

Chromaffin

Cells located in the adrenal medulla that release adrenaline and noradrenaline in response to stress.

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