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Animal Spirits

Keynesian animal spirits refer to the non-rational, emotional factors that influence economic behavior and decision-making. The concept was first introduced by economist John Maynard Keynes in his 1936 book "The General Theory of Employment, Interest and Money."

According to Keynes, animal spirits are a key determinant of economic activity, alongside more rational factors such as interest rates and investment opportunities. Animal spirits are based on a variety of non-rational factors, including emotions, confidence, and expectations about the future.

Keynes argued that animal spirits can play a major role in determining the level of investment and consumption in an economy. When animal spirits are high, investors and consumers are more willing to take risks and spend money, which can lead to higher levels of economic growth. However, when animal spirits are low, investors and consumers may become more cautious and conservative, which can lead to a decrease in economic activity and growth.

In the context of business investment, Keynes argued that animal spirits are a key factor in determining the level of investment in the economy. When animal spirits are high, businesses are more willing to invest in new projects and expand their operations, which can lead to job creation and economic growth. However, when animal spirits are low, businesses may become more hesitant to invest, which can lead to a slowdown in economic activity.

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