(Consider This) the Ratchet Effect Is the Tendency of

question 29

Multiple Choice

(Consider This) The ratchet effect is the tendency of

• A)the price level to increase but not to decrease.
• B)nominal GDP to increase more rapidly than real GDP.
• C)real interest rates to fall more rapidly than nominal interest rates.
• D)consumption to rise year after year regardless of what happens to disposable income.

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Definitions:

Sensation

The process by which our sensory receptors and nervous system receive and represent stimulus energies from our environment.

Perception

The process of organizing, identifying, and interpreting sensory information to represent and understand the environment or an event.

Difference Threshold

The minimum difference in physical stimulation required to detect a difference between sensory inputs.

Absolute Threshold

The minimum level of stimulus intensity required for a stimulus to be detected at least 50% of the time by an observer.