Suppose That the Nominal Wage, the Expected and Actual Price

question 7

Multiple Choice

Suppose that the nominal wage, the expected and actual price levels, and the expected and actual inflation rates for a hypothetical economy in 2016 are presented in the following table.

Given the data, the economy is at an unemployment rate:

• A)that is greater than the natural rate of unemployment.
• B)that is less than the natural rate of unemployment.
• C)such that there is no cyclical unemployment.
• D)that is equal to the natural rate of unemployment.

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Definitions:

Availability Heuristic

A cognitive shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

Amnesia

A loss or disturbance of memory, often due to brain injury, disease, or psychological trauma, impairing the ability to recall past experiences.

Conceptual Hierarchies

Structures that arrange knowledge and concepts from the most general to the most specific.

Species

A group of living organisms consisting of similar individuals capable of exchanging genes or interbreeding.