-The Figure Above Illustrates the Effect of an Increased Rate

question 19

Multiple Choice

-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀. From the figure, one can conclude that the ________.

• A)liquidity effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation
• B)liquidity effect is larger than the expected inflation effect and interest rates adjust quickly to changes in expected inflation
• C)liquidity effect is larger than the expected inflation effect and interest rates adjust slowly to changes in expected inflation
• D)liquidity effect is smaller than the expected inflation effect and interest rates adjust slowly to changes in expected inflation

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Definitions:

Deindividuation

A state of reduced individuality, reduced self-awareness, and reduced attention to personal standards; this phenomenon may occur when people are part of a group.

Groupthink

A psychological phenomenon where a group's desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Social Loafing

The tendency for people to work less hard in a group than when working alone.

Group Polarization

The tendency of a group to make decisions that are more extreme than the initial inclination of its members.