In the New Keynesian View a Decline in Consumer Confidence

question 23

Multiple Choice

In the new Keynesian view a decline in consumer confidence that leads to a shift left in the AD curve

• A)will cause output to fall in the short run, but not in the long run.
• B)will cause output to fall in both the short run and the long run.
• C)will not cause output to fall in either the short run or the long run.
• D)will cause output to fall only if prices are fully flexible.

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Definitions:

Attentional Filter

A mechanism of the brain that prioritizes certain types of information for processing while ignoring others, crucial for focusing attention.

Stroop Interference

A phenomenon that demonstrates the conflict between different information that the brain receives, affecting task performance, such as naming the color of a word when the word itself is a different color.

Cognitive Psychologists

Specialists who study mental processes including perception, thinking, memory, and problem-solving.

Mental Filtering

A cognitive bias that involves focusing exclusively on negative details and ignoring positive ones.