If the Economy Experiences an Unanticipated Demand Shock and Households

question 61

Multiple Choice

If the economy experiences an unanticipated demand shock and households and firms have rational expectations,there is

• A) no trade-off between unemployment and inflation in either the short run or the long run.
• B) a trade-off between unemployment and inflation in the long run, but not in the short run.
• C) a trade-off between unemployment and inflation in the short run, but not in the long run.
• D) a trade-off between unemployment and inflation in both the short run and the long run.

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Definitions:

Rapid-response Pathway

A system or mechanism in place that is designed to act or respond quickly to certain stimuli or situations, often used in emergency or high-priority contexts.

Physiological Responses

Physiological Responses are the body's automatic reactions to a stimulus, including changes in heart rate, breathing, and muscle tension.

Thalamus

A brain structure serving as a key relay station for sensory information, directing it to the appropriate areas of the brain for processing.

Amygdala

A small, almond-shaped cluster of nuclei located deep within the temporal lobes of the brain, involved in processing emotions such as fear, anger, and pleasure.