Short and Sweet! Based on the article "John Keynes and the Turbulent Birth of Macroeconomics".
1. Explain how a recession can be understood using the concepts of leakages and injections. See pps. 116-118 in particular.
2. On page 117, the authors cite some savings statstics for the U.S. Which agents in the economy (businesses or households) saved the most in 2003? Given these savings statistics, why do you think Keynes was particularly interested in the role that expectations play in determining business investment?
3. Explain what Keynes meant by the liquidity trap.