Consider the AD/AS Model

question 115

Multiple Choice

Consider the AD/AS model.Since output in the long run is determined by Y*,the only role of the AD curve is to determine the price level.This is true because

• A)Y* is independent of the price level.
• B)the aggregate demand curve is vertical.
• C)the aggregate demand curve is horizontal.
• D)Y* depends on the price level.
• E)the AS curve is upward sloping.

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Definitions:

Functional Fixedness

A cognitive bias that limits a person's ability to use an object only in the way it is traditionally used, hindering problem-solving.

Confirmation Bias

A bias towards finding, comprehending, selecting, and reminiscing information that affirms one's prior beliefs or conjectures.

Framing Effect

The cognitive bias where people decide on options based on whether they are presented in a positive or negative way, rather than on the content itself.

Confirmation Bias

The inclination to seek out, understand, prefer, and remember details in a manner that validates one's existing opinions or theories.