Most global markets have been reporting severe contractions, which mainly responding to the COVID-19 pandemic. The situation is worsened by the decrease in people’s confidence in the government as policymakers, spreading a wave of pessimism towards the future prospect of the economy. Explain how such wave of pessimism, ceteris paribus, may lead to short-term economic fluctuations, which will eventually work to push the economy back towards its long-run equilibrium. Use relevant diagrams to support your answer.
Most global markets have been reporting severe contractions, which mainly responding to the COVID-19 pandemic. The situation is worsened by the decrease in people’s confidence in the government as policymakers, spreading a wave of pessimism towards the future prospect of the economy. Explain how such wave of pessimism, ceteris paribus, may lead to short-term economic fluctuations, which will eventually work to push the economy back towards its long-run equilibrium. Use relevant diagrams to support your answer.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter25: The Keynesian Perspective
Section: Chapter Questions
Problem 20CTQ: Suppose the economy is operating at potential GDP when It experiences an increase in export demand....
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3. Most global markets have been reporting severe contractions, which mainly responding to the COVID-19 pandemic. The situation is worsened by the decrease in people’s confidence in the government as policymakers, spreading a wave of pessimism towards the future prospect of the economy. Explain how such wave of pessimism, ceteris paribus, may lead to short-term economic fluctuations, which will eventually work to push the economy back towards its long-run equilibrium. Use relevant diagrams to support your answer.
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