Juan Needed to Decide If He Should Live at Home

question 39

Multiple Choice

Juan needed to decide if he should live at home with his parents or in a dorm this year. He liked the idea of the freedom of the dorm but knew it was cheaper to live at home. According to cognitive dissonance theory, in order to reduce dissonance after deciding to stay at home Juan will likely

• A) wish that he had decided to move to the dorm.
• B) feel like he made the right decision wish he could have afforded the move.
• C) feel confident that he made the best decision; dorms are expensive and dirty anyway.
• D) change his mind at the last minute and ultimately live in the dorms.

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Definitions:

New Classical

An economic theory that emphasizes the importance of rational expectations and market-clearing prices in understanding economic fluctuations.

Rational Expectations

The hypothesis that forecasts of future values of economically relevant variables are based on all available information and are therefore optimal.

Keynesians

Followers and theorists of Keynesian economics, which emphasizes the need for government intervention in economies to manage output and demand through fiscal and monetary policies.

Classical School

A school of economic thought that emphasizes the importance of free markets, competition, and the self-regulating nature of economies.