Suppose an Economy Experiences a Permanent Increase in Its Expected

question 118

Multiple Choice

Suppose an economy experiences a permanent increase in its expected inflation rate.As a result, there is

• A) an upward movement along the short-run Phillips curve.
• B) a downward movement along the short-run Phillips curve.
• C) a downward shift of the short-run Phillips curve.
• D) an upward shift of the short-run Phillips curve.
• E) no change at all to the short-run Phillips curve.

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Definitions:

Conditioned Response

A learned response to a previously neutral stimulus that has become associated with an unconditioned stimulus.

Extinction

In psychology, the diminishing of a conditioned response when the reinforcement is withheld or the stimulus is repeatedly presented without the unconditioned stimulus.

Generalization

The process of applying the knowledge or response acquired from specific stimuli to similar stimuli.

Spontaneous Recovery

The return of a response that had been previously diminished, following an interval where the conditioned stimulus was not presented.