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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According to your text, when a surplus exists,
A) buyers compete with buyers. B) buyers compete with sellers. C) sellers compete with sellers. D) nobody has to compete because scarcity has been eliminated.
Suppose an astronomer discovers gold on the moon. Would this gold add to the world reserves?
A) Yes, we know it exists and we could recover it. B) No, we know it exists but we can't extract the gold. C) No, there are no established property rights over the moon so they cannot add to world reserves. D) Yes, but only if the astronomer is the resident of a developed country with well-established property rights.