The view of Keynes that investment drives an economy and makes it vulnerable to the capricious effects of speculative expectations
A) accurately describes recent experience in the United States.
B) is a bit overstated in the light of investment's general correlation with real GDP and the forward-looking construction of business and consumption expectations.
C) might be correct, unless consumption expectations are out of sync with business expectations.
D) is not at all correct, given the relative stability of the investment component of aggregate demand.
E) is entirely false when one corrects for the effect of changes in the rental price of capital.

Question

Quizplus · Accepted Answer

Investment is generally correlated with real GDP, and both business and consumption expectations are forward-looking, which can mitigate the impact of speculative expectations.

The View of Keynes That Investment Drives an Economy and Makes