Suppose the Population Were Convinced That All Current Adjustments in Income

question 1

Multiple Choice

Suppose the population were convinced that all current adjustments in income were temporary. In the short run then,

• A) the IS curve would be steeper than usual, the government spending multiplier would be larger, and monetary policy would be weaker.
• B) the IS curve would be steeper than usual, the gove rnment spending mu l t i- plier would be smaller, and monetary policy would be less effe c t ive.
• C) the IS curve would be flatter than usual, the government spending multi- plier would be smaller, and monetary policy would be more effective.
• D) the IS curve would be flatter than usual, the government spending multi- plier would be unaffected, but monetary policy would be less effective.
• E) none of the above.

---

Definitions:

Neo-Freudian

Psychologists who were influenced by Freud's theories but developed their own distinct psychological theories and concepts.

Jung

Refers to Carl Jung, a Swiss psychiatrist and psychoanalyst who founded analytical psychology and introduced concepts like archetypes and the collective unconscious.

Denial

A psychological defense mechanism where an individual refuses to accept reality or facts, thus avoiding a psychologically uncomfortable truth.

Terminal Illness

A terminal illness is a disease or condition that is considered incurable and is likely to lead to death.