-In the Above Figure, the Economy Is Initially at Point

question 303

Multiple Choice

-In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is

• A) a shift to AD₁.
• B) a shift to AD₂.
• C) a movement to point A.
• D) a movement to point C.

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Definitions:

Illusion of Control

The tendency for individuals to overestimate their ability to control events or outcomes.

Optimistic Bias

The tendency to believe that we are less likely to experience negative events compared to others.

Anchoring

Anchoring refers to the cognitive bias where an individual relies too heavily on an initial piece of information (anchor) when making decisions.

Stereotyping Heuristic

A cognitive shortcut that involves making judgments about an individual based on generalized beliefs about the group to which they belong.