What is the meaning of "animal spirits"? How do these relate to planned investment spending and to unplanned investment spending?
What will be an ideal response?
Animal spirits are emotional waves of optimism and pessimism. They influence autonomous investment, changing the amount of planned investment at any real interest rate. They impact unplanned investment, as well, since each firm's planned investment expenditures are, typically, purchases from other firms. A sudden change from optimism to pessimism will leave businesses with unsold inventory, an increase in inventory investment. Unplanned negative inventory investment results from a change from pessimism to optimism.
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If a car costs $44,000 in the U.S. and 40,000 euros in Germany, what does the exchange rate need to be for purchasing power parity to exist?
a) 1 euro = $0.91 b) 1 euro = $1 c) 1 euro = $1.10 d) 1 euro = $1.76
Which of the following is not a source of technological advancement for a producer?
A) better trained workers B) more efficient physical capital C) higher skill level of managers D) outsourcing some aspect of production