Suppose that managers forecasted a large decline in expected sales and profits and so their confidence plummets. According to the __________, this forecast might start a business cycle.
A) circular flow theory
B) Keynesian cycle theory
C) monetarist cycle theory
D) new classical cycle theory

Question

Quizplus · Accepted Answer

The Keynesian cycle theory suggests that changes in confidence and expectations of businesses can trigger a business cycle. A decrease in confidence can lead to a decrease in investment which in turn can lead to a decrease in economic activity and employment, thus starting a cycle of economic contraction.

Suppose That Managers Forecasted a Large Decline in Expected Sales