The Reason That Stagflation Tends to Follow an Inflationary Gap

question 76

Multiple Choice

The reason that stagflation tends to follow an inflationary gap is that

• A)output tends to fall even as prices continue to rise as part of the self-correcting mechanism.
• B)government officials tend to overact in controlling inflation.
• C)businesses try to increase profits by raising prices and increasing output.
• D)workers accept pay cuts to maintain employment.

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Definitions:

Eyewitness Recognition

The process by which an individual who has witnessed a crime or event identifies persons, objects, or places related to the incident.

Elizabeth Loftus

A cognitive psychologist known for her work on the malleability of human memory and its implications for eyewitness testimony.

False Positive

A test result that wrongly indicates the presence of a condition or attribute when it is not actually present.

Sensory Memory

The shortest-term element of memory, which acts as a buffer for stimuli received through the senses, lasting up to a few seconds.