Suppose We Know the Following Information About a Hypothetical Economy

question 52

Multiple Choice

Suppose we know the following information about a hypothetical economy: - real GDP = $945 billion
- potential GDP = $900 billion
- inflation rate = 3%
If the central bank conducts monetary policy in an attempt to keep the unemployment rate below the NAIRU,the inflation rate is likely to

• A)cause stagflation.
• B)cause a recession.
• C)remain constant at 3%.
• D)fall below 3%.
• E)rise above 3%.

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Definitions:

Difference-Equals-Deficit Error

The mistaken belief that a deviation from some norm is necessarily inferior.

Cognitive Theory

A theory of psychology that emphasizes internal states, such as knowledge, thought processes, and mental imagery, as key elements in understanding behavior.

Modeling

A method used in learning that involves observing and imitating others' behaviors.

Critical Periods

denote specific times during an organism's life when it is particularly susceptible to certain stimuli or experiences, which can have a significant impact on future development.