Which of the Following Statements Is Correct

question 25

Multiple Choice

Which of the following statements is correct?

• A) If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks, then policy that stabilizes inflation will also stabilize economic activity, even in the short run.
• B) If temporary supply shocks are more common, then a central bank must choose between stabilizing inflation and stabilizing output in the short run.
• C) In the long run, there is no conflict between stabilizing inflation and economic activity in response to shocks.
• D) all of the above.

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Definitions:

Perceptual Distortions

Cognitive biases or errors that lead to misinterpretation or misjudgment of sensory information, social situations, or interpersonal communications.

Stereotypes

Widely held but fixed and oversimplified images or ideas of a particular type of person or thing.

Selective Attention

The tendency to selectively focus on aspects of situations that are most aligned with our own interests, values, and attitudes.

Perceptual Distortion

A cognitive bias that affects the way individuals perceive or interpret information, leading to misjudgment or misunderstandings.