Possible Reasons for Secular Stagnation. Lawrence Summers offered a number of reasons why there might not be sufficient aggregate demand to generate full employment with the result being secular...

Possible Reasons for Secular Stagnation. Lawrence Summers offered a number of reasons why there might not be sufficient aggregate demand to generate full employment with the result being secular stagnation. Discuss each of the factors below and explain why they may lead to insufficient aggregate demand:

a. The distribution of income has shifted to higherearning individuals who save more than lowerearning ones.

b. The most successful corporations today like Apple or Google do not purchase as many capital goods for their business compared to companies in the past such as railroads or steel plants.

c. Interest rates are close to zero now.

d. Technological progress has reduced the prices of capital equipment.

e. Financial regulation has made it more difficult for banks to extend loans.

(Related to Application 1 on p. 340.)