Keynes believed that unstable investment caused the Great Depression. Using the simple Keynesian model, explain how a fall in investment affects equilibrium output
What will be an ideal response?
A fall in investment will reduce aggregate output by a greater amount that the initial fall in investment. This happens because of the multiplier effect.
Economics
You might also like to view...
According to the principle of diminishing marginal utility, as the quantity of a good or service consumed increases, total utility
A) increases. B) decreases. C) is unchanging. D) is zero.
Economics
Which of the following is a characteristic of monopoly in the long run?
A) The firm makes zero economic profit. B) The firm can make an economic profit. C) Price equals marginal cost. D) Price equals marginal revenue.
Economics