Week 3: John Maynard Kaynes

Question 1

A volatile economy, Volatile investment:

Answer 1

Economies are volatile, Boom bust cycles. They are volatile because investment (I) is volatile. Investment is volatile because it depends of future profit and demands. The future is fundamentally uncertain.

Question 2

Kayne’s believed we used _____ to make decisions. Heuristics can drive manias, panics, and “animal spirits”.

Answer 2

“Heuristics”

Question 3

Downturns / Recessions

Answer 3

Recessions are a result of decreased spending. To avoid them, we need to increase spending. To kaynes, the obvious choice was to increase investment.

Question 4

This equation shows how the economy is spending money:

Answer 4

y = C + I + G ( X - M )

Y = Total or aggregate spending
C = consumption
I = investment
G = government spending
X = exports
M = imports

Question 5

What is the role of the national government:

Answer 5

1. Demand management
2. Industrial policy

Question 6

There was a Keynes response to Covid.

Answer 6

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