What is an example of fundamental uncertainty

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Keynesian Business Cycle Theory. John Maynard Keynes believed investment was the engine of long-run economic growth. Not only that, he believed that the volatility of private investment spending was the dominant cause of business cycles (recessions and expansions). He argued private investment spending was subject to wild fluctuations because 1) the future is fundamentally uncertain and 2) managers can be subject to waves of unwarranted optimism and pessimism ("animal spirits").

a. What is an example of fundamental uncertainty? In other words, give an example of something no one could have predicted.

b. Taking into account "animal spirits" why might business owners be reluctant to increase their investment spending even after the coronavirus starts to stabilize?

Reference no: EM132484649

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