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Title: AS Level economics (macro) - Keynes v. Classical and "animal spirits" - Edexcel
Description: This sheet describes what animal spirits are, including a real-world example. On the second page there is a table that compares the views of Keynes vs. Classical economists surrounding human behaviour and the role of governments within an economy.
Description: This sheet describes what animal spirits are, including a real-world example. On the second page there is a table that compares the views of Keynes vs. Classical economists surrounding human behaviour and the role of governments within an economy.
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Keynes - “Animal Spirits”
What are they?
Animal Spirits was a term coined by John Maynard Keynes to describe the mixture of
confidence, trust, mood and expectations which businesses and consumers have
...
g
...
For
example when confidence is low, consumers start saving more and spending less as do businesses
...
They may also make staff cuts,
meaning that their output of goods and services decreases
...
Therefore, Animal Spirits refer to the ways that
human emotion can drive financial decision making in uncertain environments and
volatile times (this is one reason why an economy’s performance is hard to
accurately predict)
...
Classical view
Keynes
Classical
Believed that governments should
intervene more, particularly during
recessions, when more govt
...
(and prevent businesses from shutting
down, high levels of unemployment,
etc
...
Believed that humans often make
irrational decisions depending on the
state of the economy, which creates a
psychological response in them
...
Believed that fiscal policy (the deliberate
manipulation of govt
...
Believes that governments should have
no discretionary or determining role in
altering the state of Aggregate Demand
...
Government borrowing is necessary to
help increase Aggregate Demand
...
g
...
We should aim to reduce government
borrowing and balance the budget
because there is no benefit from higher
government spending
...
Title: AS Level economics (macro) - Keynes v. Classical and "animal spirits" - Edexcel
Description: This sheet describes what animal spirits are, including a real-world example. On the second page there is a table that compares the views of Keynes vs. Classical economists surrounding human behaviour and the role of governments within an economy.
Description: This sheet describes what animal spirits are, including a real-world example. On the second page there is a table that compares the views of Keynes vs. Classical economists surrounding human behaviour and the role of governments within an economy.