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Chapter 7: e (page 157)

Why do you suppose that some economists have suggested that "irrational exuberance"-unjustified optimism about future economic performance can contribute to business expansions?

Short Answer

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Any unjustified positive thinking about a future financial execution can cause money managers to go with hopeful choices prompting development in business exercises.

Step by step solution

01

Introduction

The inborn inclination that people and money managers have about future financial occasions the term animal spirit was introduced.

02

Explanation

  • Through this hypothesis that very much like creatures become ready on the expectation of a strange yet innocuous commotion, outlandish stresses over future occasions can cause money managers to pursue cynical choices prompting a decline in the business action.
  • It is due to this reason that some economists have suggested that "irrational exuberance"-unjustified optimism about future economic performance can contribute to business expansions.

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Most popular questions from this chapter

Suppose you are given the following information:

a. What is the total population?

b. How many people are unemployed, and what is the unemployment rate?

c. What is the labour force participation rate?

In a country with a labour force of 200, a different group of 10 people becomes unemployed each month but becomes employed once again a month later. No others outside these groups are unemployed.

a. What is this country's unemployment rate?

b. What is the average duration of unemployment?

c. Suppose that establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month. Nevertheless, a different group of 10 people still becomes unemployed each month. Now, what is the average duration of unemployment?

d. Following the change discussed in part (c), what is the country's unemployment rate?

Suppose that a nation has a labour force of 100 people. In January, Amy, Barbara, Carine, and Denise are unemployed. In February, those four find jobs, but Evan, Francesco, George, and Horatio become unemployed. Suppose further that every month, the previous four who were unemployed find jobs and four different people become unemployed. Throughout the year, however, three people-Ito, Jack, and Kelleycontinually remain unemployed because firms facing government regulations view them as too costly to employ.

a. What is this nation's frictional unemployment rate?

b. What is its structural unemployment rate?

c. What is its unemployment rate?

Consider the following price indexes: 90 in 2017, 100 in 2018,110 in 2019, 121 in 2020, and 150 in 2021. Answer the following questions.

a. Which year is likely the base year?

b. What is the inflation rate from 2018 to 2019?

c. What is the inflation rate from 2019 to 2020?

d. If the cost of a market basket in 2018 is 2,000$, what is the cost of the same basket of goods and services in 2017? In 2021?

Understand key features of business fluctuations.
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