How do animal spirits affect GDP?
What will be an ideal response?
Keynes believed in a phenomenon that he dubbed animal spirits, which represent psychological factors that lead to changes in the mood of consumers and businesses, thereby affecting consumption, investment, and GDP. In Keynes's view, the animal spirits in an economy could fluctuate sharply even as the underlying fundamental features of the economy changed relatively little. For example, a period of heightened optimism could give way to a period of deep pessimism even though the economic fundamentals - technology, physical capital, and human capital - had not changed much.
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The United States imports t-shirts because
A) it is a dangerous job to produce them. B) the United States has a lower opportunity cost of production. C) the United States must import goods and services from other countries so that they can develop economically. D) foreign economies have an absolute advantage in their production. E) foreign nations have a lower opportunity cost of production.
The result of the supply shocks of 1973-1974 was to
A) reduce aggregate output and raise the price level. B) reduce the price level and raise aggregate output. C) reduce both aggregate output and the price level. D) raise both aggregate output and the price level.
The market for General Motors' bonds
a. exists only within the geographical boundaries of the United States b. is not defined by its geographic location c. is at the New York Stock Exchange d. is at the U.S. Treasury e. is in London, England
Why are total expenditures on a good maximized at the point on the demand curve where the price elasticity of demand equals -1? Explain your answer using the appropriate algebra.
What will be an ideal response?