ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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After the global financial crisis, there has been a heated debate about whether the sluggish
recovery in advanced economies reflects the secular stagnation or a slowing trend under
debt overhang. Advocates of secular stagnation argue that tepid investment spending along
with subdued consumption by households would result in persistent output gap and slow
growth for many years to come. Also, the resulting excess of global savings over global
investment in turn would put the real interest rate on a downward path. There are several
explanations for this secular stagnation hypothesis. Which of the following cannot be
viewed as such explanation?
a. Decline in investment rates due to a dearth of profitable investment opportunities
b. Decline in the relative price of investment goods – hence the same investment projects
can be pursued by committing a smaller share of
of investment in total.
c. Decline in population growth rate means capital has less additional labor to work with,
resulting in a lower amount of investment in total.
d. All of the above are potential explanations
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